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PROMOTING INVESTMENT AND PROTECTING COMMERCE ONLINE: THE ART ACT, THE NET 

ACT AND ILLEGAL STREAMING 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INTELLECTUAL PROPERTY, 

COMPETITION, AND THE INTERNET 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

JUNE 1, 2011 

Serial No. 112–77 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 

(II) 

COMMITTEE ON THE JUDICIARY 

LAMAR SMITH, Texas, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

DANIEL E. LUNGREN, California 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

[Vacant] 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

MIKE QUIGLEY, Illinois 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

SEAN MCLAUGHLIN, Majority Chief of Staff and General Counsel 

PERRY APELBAUM, Minority Staff Director and Chief Counsel 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET

BOB GOODLATTE, Virginia, Chairman 

BEN QUAYLE, Arizona, Vice-Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

SANDY ADAMS, Florida 

[Vacant] 

MELVIN L. WATT, North Carolina 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

BLAINE MERRITT, Chief Counsel 

STEPHANIE MOORE, Minority Counsel 

(III) 

C O N T E N T S 

JUNE 1, 2011 

Page 

OPENING STATEMENTS 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Subcommittee on Intellectual Property, Competition, and the Internet .................................................................................... 1 

The Honorable Melvin L. Watt, a Representative in Congress from the State 

of North Carolina, and Ranking Member, Subcommittee on Intellectual 

Property, Competition, and the Internet ............................................................ 5 

WITNESSES 

The Honorable Maria A. Pallante, Register, U.S. Copyright Office 

Oral Testimony ..................................................................................................... 8 

Prepared Statement ............................................................................................. 10 

Sandra Aistars, Executive Director, Copyright Alliance 

Oral Testimony ..................................................................................................... 22 

Prepared Statement ............................................................................................. 25 

Michael P. O’Leary, Executive Vice President, Government Affairs, Motion 

Picture Association of America 

Oral Testimony ..................................................................................................... 36 

Prepared Statement ............................................................................................. 39 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable Bob Goodlatte, a Representative in 

Congress from the State of Virginia, and Chairman, Subcommittee on Intellectual Property, Competition, and the Internet ............................................... 3 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee 

on the Judiciary, and Member, Subcommittee on Intellectual Property, 

Competition, and the Internet ............................................................................ 5 

(1) 

PROMOTING INVESTMENT AND PROTECTING 

COMMERCE ONLINE: THE ART ACT, THE 

NET ACT AND ILLEGAL STREAMING 

WEDNESDAY, JUNE 1, 2011 

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON INTELLECTUAL PROPERTY,

COMPETITION, AND THE INTERNET, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:05 p.m., in room 

2141, Rayburn Office Building, the Honorable Bob Goodlatte 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Quayle, Sensenbrenner, 

Coble, Chabot, Marino, Watt, Conyers, Berman, Chu, and Lofgren. 

Staff present: (Majority) David Whitney, Counsel; Olivia Lee, 

Clerk; and Stephanie Moore, Minority Counsel. 

Mr. GOODLATTE. Good afternoon. The Subcommittee on Intellectual Property, Competition, and the Internet will come to order. 

I have an opening statement. 

To advance progress and effectively secure the exclusive rights of 

authors for a limited time as the drafters of our Constitution intended, Congress must, from time to time, revisit existing authorities and assess their efficacy. When authorities are found wanting, 

we have a responsibility to take action to update the law to ensure 

it properly accounts for changed circumstances and anticipates reasonably foreseeable developments. 

With the enactment of the No Electronic Theft Act, or NET Act, 

in 1997 and the Artists Rights and Theft Prevention Act, or ART 

Act, in 2005, Congress exercised this responsibility in the context 

of online infringement. In both instances, we took decisive action 

to update the criminal copyright infringement provisions of Federal 

law to better secure the rights of authors. 

The NET Act was enacted in direct response to the 1994 U.S. 

district court decision in U.S. v. LaMacchia. In that case, the court 

dismissed an indictment against the defendant because the law did 

not provide criminal penalties for someone who willfully engaged in 

large-scale copyright infringement unless there was also evidence 

they acted with a commercial motive or had benefitted financially. 

The NET Act closed this loophole and made additional improvements to the criminal code and related provisions to the Copyright 

Act to better protect copyrighted works online. Its unanimous pasVerDate Aug 31 2005 10:45 Mar 06, 2012 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6601 H:\WORK\IP\060111\66614.000 HJUD1 PsN: DOUGA
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sage affirmed the belief that intellectual property is no less valuable than physical property. 

Several years later, the predecessor to this Subcommittee, acting 

under the leadership of Chairman Smith, developed the ART Act. 

That measure sought to protect pre-release works by targeting infringers who knowingly distributed unauthorized copies prior to 

their commercial distribution to the public. The ART Act recognized that copyright owners are disproportionately harmed by theft 

that occurs during these windows and provided prosecutors with an 

important new tool to deter the reproduction and distribution of 

such works. 

Notwithstanding these authorities, technological advances in recent years have enabled infringers to employ new ways to misuse 

the Internet in the delivery of unauthorized content. Their success 

undermines investments by copyright owners and has an outsized 

impact on independent artists and creators as we will soon hear in 

more detail from Ms. Aistars of the Copyright Alliance. 

Contrary to some beliefs, their success also undercuts innovative 

companies like Netflix, a licensed provider that developed proprietary technology that allows subscribers to instantly watch movies 

and TV programs streamed over the Internet to their computers 

and TV’s. 

Without objection, I ask that I be permitted to place a May 30, 

2011 letter from Netflix to myself and the Ranking Member into 

the hearing record. Without objection, so ordered. 

[The information referred to follows:] 

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Mr. GOODLATTE. Similar streaming technologies are employed by 

other services and websites not to generate legal revenue that is 

used to license existing works and incentivize the creation of new 

works, but instead to undercut legitimate producers and undermine 

the legal marketplace. Quite simply, when the NET and ART Acts 

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frastructure needed to promote large-scale illicit streaming either 

didn’t exist or wasn’t deployed. If it had, we would have provided 

appropriate authorities at that time. As a result, the amendments 

to the criminal copyright infringement statutes that were adopted 

were confined to technologies that impacted the exclusive rights of 

reproduction and distribution, not the public performance right, 

which is impacted by streaming. 

As infringers have moved to adapt technology to more efficiently 

deliver unlicensed content online and evade prosecution, it is incumbent on Congress to review the law and to adapt it in a manner that permits contemporary prosecutors to meaningfully pursue 

and deter today’s copyright criminals. 

My view is that Congress adopted the right policies when it enacted the NET and ART Acts. What is needed is for us to extend 

these policies to illicit streaming in a similar fashion and to ensure 

our prosecutors are provided with the necessary tools to meaningfully enforce the law. Going forward, I want to work with interested colleagues to accomplish these purposes. 

But for now, I look forward to welcoming our witnesses and hearing their specific thoughts on how we should best approach this 

matter. 

It is now my pleasure to recognize the Ranking Member of the 

Subcommittee, the gentleman from North Carolina, Mr. Watt. 

Mr. WATT. Thank you, Mr. Chairman. I thank the Chairman for 

holding the hearing. 

I share the Chairman’s views that we need to get aggressive on 

this issue, and I look forward to the witnesses’ testimony to help 

us figure out how best to do that. 

With that, I yield back the balance of my time. 

Mr. GOODLATTE. That is about as succinct as can be. 

I now see that the Ranking Member of the full Committee, Mr. 

Conyers, is here. Would you like to be recognized for an opening 

statement? 

Mr. CONYERS. No. I will submit my statement. 

[The prepared statement of Mr. Conyers follows:] 

Prepared Statement of the Honorable John Conyers, Jr., a Representative 

in Congress from the State of Michigan, Ranking Member, Committee on 

the Judiciary, and Member, Subcommittee on Intellectual Property, Competition, and the Internet 

Copyright owners face unique challenges to enforcing their rights on the Internet. 

Today, our Subcommittee will consider streaming technology—a subject the Full 

Committee began consideration of last Congress on December 16, 2009. 

More and more of our media—the music we listen to, the TV shows we tune into, 

and the sports we watch—is moving to the Internet. 

Piracy has increasingly injured artists and intellectual property owners as individual consumers have access to faster, more powerful Internet connections. 

There is a loophole in current law that makes illegal streaming a misdemeanor 

instead of a felony and fails to capture all of the bad actors, and I expect that this 

Committee will begin consideration of what I hope will be bipartisan legislation to 

solve this problem. 

I want to make clear at this point that I am not talking about directing the Justice Department to go after every individual who takes part in illegal streaming 

with this legislative effort, like college students downloading unauthorized music. 

We need to first go after the people who profit from these illegal activities; the Justice Department needs to be able to prosecute those who commercially gain from illegal streaming as felons. 

6 

As Internet connections become standard features for TV sets and people watch 

their favorite TV shows from their cell phones, content creators are having to rely 

more and more on the Internet to market and broadcast their property. The ‘‘Information Superhighway’’ is not just for information; it is a one-stop-shop for every 

form of media and entertainment. 

For content owners and broadcasters, this means new and expanding fan bases, 

but it also leaves the value of their product vulnerable to piracy. 

In a study by the research organization Envisional, it was found that one-quarter 

of all global Internet traffic is already devoted to video streaming, and it is the fastest growing category of traffic. Unfortunately, as streaming traffic grows, so does 

the streaming traffic dedicated to infringement. 

As we will hear from representatives from the Motion Picture Association and the 

Copyright Alliance, millions of dollars are lost to the U.S. economy because of 

streaming and other online piracy. 

The copyright and criminal code unfortunately contains a gaping loophole—not 

because Congress intended to create a carve-out, but because when laws like the 

ART Act and the NET Act were enacted in this arena, no one anticipated that 

streaming technology would become such a dominant source of disseminating information. 

Because felony penalties require a ‘‘reproduction’’ or ‘‘distribution’’—as codified in 

Title 18 Section 2319(b)(1)—federal law has unwittingly overlooked streaming-related infringement. 

As the Intellectual Property Enforcement Coordinator, Victoria Espinel, noted in 

her legislative recommendations to Congress, we should update the copyright code 

to reflect technology and ensure parity in enforcement provisions. 

I would applaud Senator Klobuchar for her efforts in this arena, although I am 

sensitive to the fact that the concerns of some industries—including making sure 

that music is adequately covered—should be addressed in a House effort. 

I would yield back and thank the Chairman and Ranking Member for this important hearing. 

Mr. GOODLATTE. I thank the gentleman. 

Without objection, all other Members’ opening statements will be 

made a part of the record. 

And we will now turn to our witnesses. We have a very distinguished panel of witnesses today. All of your written statements 

will be entered into the record in their entirety. And I ask that 

each witness summarize their testimony in 5 minutes or less. To 

help you stay within that time, there is a timing light on your 

table. When the light switches from green to yellow, you will have 

1 minute to conclude your testimony. When the light turns red, you 

are done. 

Before I introduce our witnesses, I ask them to stand and be 

sworn, as is the custom of this Committee. 

[Witnesses sworn.] 

Mr. GOODLATTE. Thank you and please be seated. 

Our first witness is Maria Pallante, the 12th appointed Register 

of Copyrights in the history of the United States. Perhaps I should 

allow that to sink in for a moment. For those of you who haven’t 

heard the news. The Librarian of Congress, Dr. James H. 

Billington, formally appointed Ms. Pallante as Register in a permanent capacity today. Ms. Pallante takes over leadership of the office 

at a time of great challenge and transition. Her immediate predecessor, Marybeth Peters, served as Register for 16 years and devoted more than 45 years to public service. We are pleased to share 

this momentous day with Ms. Pallante and honored that one of her 

first public acts as Register will be to continue the tradition of having the Register serve as the principal advisor to the Congress on 

matters of copyright policy. 

7 

Mr. CONYERS. Mr. Chairman, can we give her a round of applause for that? 

Mr. GOODLATTE. Absolutely. [Applause.] 

Now, to tell you more about the person you just applauded, Ms. 

Pallante has spent much of her career in the office where she previously served as the Associate Register for Policy and International Affairs, Deputy General Counsel and Policy Adviser. In 

addition, Ms. Pallante spent nearly a decade as Intellectual Property Counsel and Director of Licensing for the Guggenheim Museums in New York. She earned her J.D. from George Washington 

University and her bachelor’s degree from Misericordia University 

where she was also awarded an honorary degree of humane letters. 

Given the significance of today’s news and if there is no objection, then I offer Ms. Pallante a moment to address the Subcommittee before introducing our two remaining distinguished witnesses. Ms. Pallante? 

Ms. PALLANTE. Thank you very much, Mr. Chairman. I am deeply honored by Dr. Billington’s appointment today and it is a privilege to begin my tenure as Register by appearing before this Subcommittee. 

Marybeth Peters left behind a tremendous legacy, and it is my 

goal to continue her work and to build the premier copyright registration system for the United States and one that is the envy of 

the world. 

I also believe that the role of my office is increasingly important—perhaps more important than ever before—in policy and 

international affairs, and I feel very fortunate to have a talented 

staff and a diverse and vibrant stakeholder community to draw 

upon for assistance. 

Thank you again, Mr. Chairman, and I look forward to supporting the work of this Subcommittee. 

Mr. GOODLATTE. Thank you, Ms. Pallante, and we look forward 

to working with you as well to advance the interests of authors and 

the public. 

Our second witness is Ms. Sandra Aistars. Am I pronouncing 

that correctly? The Executive Director of the Copyright Alliance, a 

nonprofit organization established in 2006. Ms. Aistars took over 

leadership of the alliance in January of 2011. Immediately prior, 

Ms. Aistars spent 7 years with Time Warner where she served in 

a variety of positions. These included Vice President and Associate 

General Counsel. While there, she coordinated the company’s intellectual property strategies, which included taking advantage of 

new opportunities and responding to the challenges associated with 

emerging digital technologies. 

Before moving to Time Warner, Ms. Aistars spent 12 years as an 

attorney in private practice here in Washington. She acquired her 

J.D. from the University of Baltimore School of Law and earned 

her B.A. in political science, history and philosophy at Bard College. 

Our final witness is Michael O’Leary, the Executive Vice President of Government Relations at the Motion Picture Association of 

America. In that position, Mr. O’Leary is responsible for overseeing 

all Federal and State legislative and regulatory strategies for 

MPAA. Before moving to MPAA, Mr. O’Leary served more than a 

8 

dozen years at the Department of Justice where he worked on legislative, intellectual property, and enforcement issues. During his 

tenure there, he served as the Deputy Chief of the Computer Crime 

and Intellectual Property Section where he prosecuted and supervised some of the most significant domestic and international 

criminal and IP cases ever undertaken by the Department. Before 

joining the Department of Justice, Mr. O’Leary spent 5 years serving as counsel to the Senate Judiciary Committee. He grew up in 

Montana and is a graduate of Arizona State University and the 

University of Arizona School of Law. 

We welcome all of our witnesses to the Subcommittee, and we 

will begin with the Register’s opening statement. 

TESTIMONY OF THE HONORABLE MARIA A. PALLANTE, 

REGISTER, U.S. COPYRIGHT OFFICE 

Ms. PALLANTE. Thank you, Mr. Chairman and Ranking Members 

Watt and Conyers, for this hearing and also for your attention to 

copyright enforcement these past few months. 

At the outset, I just want to underscore that our conversation 

today is about criminal conduct. In the context of copyright law, 

this means willful, large-scale, and egregious, and it is the type of 

activity that does not happen by accident and which inflicts serious 

economic harm. 

Criminal provisions are necessarily stronger than civil provisions, and they are not a recent development. We have had criminal provisions in copyright law since 1897. 

As described in your opening remarks, Mr. Chairman, the Internet has brought new challenges for copyright enforcement, and as 

you noted, Congress has amended the criminal law twice in the 

past 15 years directly responding to copyright theft online, albeit 

it for the rights of reproduction and distribution. If I may make an 

obvious statement, such work is a necessary but never-ending task 

for Congress. Copyright policy will never be static because technology will always create new business models for authors and new 

opportunities for infringers. 

So against this backdrop, I would like to make three brief points. 

First, streaming implicates the exclusive right of public performance, which is fundamentally important to authors of certain kinds 

of works, for example, movies, television programming, live sporting events, and music. And thanks to improved bandwidth and innovative business models, it is of growing importance in the marketplace. 

Second, there is a disparity in how the law treats criminal violations of the exclusive rights of reproduction and distribution on the 

one hand and infringement of the exclusive right of public performance on the other. The disparity was once appropriate, but it is 

now outdated. 

Third, there are important policy reasons to give prosecutors the 

necessary tools to combat illegal streaming, allowing them in their 

discretion to bring felony charges. 

So starting with my first point, today authors and other copyright owners license streaming of all kinds of creative content, 

often directly to consumers. Performances can be pre-recorded and 

streamed to customers on demand or streams can provide access to 

9 

live content such as basketball and football games on a subscription or a pay-per-view basis including from websites. Customers 

can also store licensed content or content they have created themselves in the cloud and access it through their smart phones and 

video game consoles. 

So all of this suggests that new products and platforms relying 

on streaming are a growing segment of the information and entertainment markets and, therefore, of increasing consequence for 

copyright owners. Indeed, according to one recent study, which I 

cite in my written testimony, video streaming traffic accounts for 

more than one-quarter of all Internet traffic. 

Turning to the disparity under current law, in our analysis, current law is insufficient to provide a basis for prosecutions in cases 

where the primary cause of action is infringement of the exclusive 

right of public performance. This is because an unauthorized public 

performance is at most a misdemeanor under current law, even 

where the conduct is undertaken purposely and with a profit motive. 

So what are the policy issues for Congress? Simply put, the disparity in treatment requires attention. Illegal streaming—just like 

illegal downloading and copying and distribution—has the capacity 

to ruin the economic market for a copyrighted work. Recognizing 

that, as a practical matter, prosecutors have little incentive to file 

charges for a misdemeanor, we believe the Department of Justice 

should always have the tools necessary to file felony charges 

against infringers when infringement meets the standards of criminal conduct and causes great harm to copyright owners and to the 

global marketplace that is so important to the United States. 

To be clear, the Copyright Office is not offering an opinion on 

when it might or might not be appropriate for the Department of 

Justice to bring criminal felony charges under any particular set of 

circumstances. Rather, we are underscoring the fact that prosecutors have a handicap when pursuing egregious cases of unauthorized streaming. Moreover, Congress may have a chance here to get 

in front of the issue of illegal streaming before it proliferates further. 

Thank you, Mr. Chairman. 

[The prepared statement of Ms. Pallante follows:] 

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Mr. GOODLATTE. Thank you. 

Ms. Aistars, welcome. 

TESTIMONY OF SANDRA AISTARS, EXECUTIVE DIRECTOR, 

COPYRIGHT ALLIANCE 

Ms. AISTARS. Thank you. Chairman Goodlatte, Ranking Member 

Watt and Ranking Member Conyers and Members of the Subcommittee, it is an honor to appear before you today on behalf of 


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the Copyright Alliance to discuss illegal streaming and its impact 

on the creative community. 

The Copyright Alliance is a public interest and educational organization supported by more than 40 entities comprised of individual artists and creators, as well as the associations, guilds, and 

corporations that support and invest in them. Besides these institutional members, we have more than 7,000 individual, one-voice artist advocates who give their personal time and creativity to support 

our work. 

To be specific, we support harmonizing the laws applicable to 

criminal streaming of copyrighted works with those applicable to 

criminal reproduction and distribution of copyrighted works. This 

is an issue of great importance to many of our members, including 

independent filmmakers, songwriters and composers, sports 

leagues and creators of live events, sound recording artists, and 

unions and guilds in the creative community. 

In truth, making illegal streaming a felony crime is simply a 

technical clarification. Illegally disseminating other people’s works 

without their permission should be punished the same way under 

law regardless of the technology used. 

On a grander scale, however, this issue is another phase in the 

battle between creators and lawful distributors of copyrighted 

works on the one hand and parasitic websites on the other. Operators of these websites expropriate the property of creators, diminish 

the compensation and benefits of creators and workers and harm 

communities across the United States by depriving them of jobs 

and of tax revenues. 

The Copyright Alliance represents the copyright holder next 

door. Our members are living and working in all 50 States and include, among others, the independent filmmakers who self-finance 

films that tell as-yet-untold stories, the talented crafts people who 

are behind every television show and motion picture you enjoy, the 

tens of thousands of professional photographers and videographers 

across the country who run their own studios, employ a handful of 

workers, and contract with a dozen more, and there are people 

working in unexpected places on extraordinary projects, like a 

music producer living in Wrightsville, North Carolina, who is working from his home studio with musicians as far away as Glasgow 

and as recognized as Neil Young. 

Copyright Alliance members unreservedly embrace the technologies that enable our works to be seen and heard by our audiences. Nevertheless we are daily faced with an ever-changing parade of unlawful website operators who stream our members’ 

works, yet stand little risk of criminal prosecution under today’s 

laws. 

Just like the legitimate marketplace, which has embraced 

streaming technology, illegitimate distributors are increasingly 

turning to streaming because it is faster, cheaper, and more convenient for the consumer. 

Enacting legislation to ensure that such sites can’t avoid criminal 

prosecution based purely on their choice of technology is critical. 

Bringing penalties for illegal streaming online with other forms of 

infringement would send a message that operators of and largescale contributors to rogue streaming sites are not immune from 

24 

serious prosecution. It would also provide the Justice Department 

the same tools to battle infringing streaming sites as they use to 

battle physical or download operations. 

When considering issues of copyright infringement, the public 

often thinks about large copyright owners and distributors, but digital theft, regardless of the methods that are employed to accomplish it, affects all creators and it has an outsized impact on independent artists and creators. 

The experience of Copyright Alliance member, Ellen Seidler, is 

representative of the experiences of other independent artists and 

is instructive. Ms. Seidler is the director and creator of the film 

‘‘And Then Came Lola.’’ She and her co-director financed the film 

by taking loans from their families, by putting liens on their 

homes, and by borrowing against their retirement savings. While 

the total budget for the movie would be considered small in terms 

of major Hollywood productions, the $250,000 of personal capital 

invested by Ms. Seidler and her colleague is a huge amount for an 

individual creator to put at risk for a single project. Ms. Seidler released the movie approximately 1 year ago and it was very popular. 

Within a few days, illegal copies began circulating online and within a couple of months, Ms. Seidler had counted 35,000 illegal 

streams and downloads, and she was overwhelmed and stopped 

counting. 

The film could be viewed legally for less than the cost of a latte, 

and Ms. Seidler had spared no effort to ensure that it was available 

conveniently in multiple languages and formats. Yet, the film 

popped up on illegal streaming sites in the U.S. and throughout the 

world. She counted the film on one Chinese streaming site which 

claimed 300,000 views and on another site in Spain claiming more 

than 60,000 views. Often the sites that were streaming her works 

were monetizing her work by selling advertising against the 

streams, and ironically on one of the sites, Google’s AdSense program was placing ads for legitimate streaming services including 

Netflix, a legitimate distributor of her film. 

When she contacted the sites and the advertising networks that 

were placing ads on them, she got very dismissive responses. One 

website in Russia basically responded your laws don’t apply here, 

and she is still involved in an unresolved exchange with Google 

about the use of AdSense by such sites. 

Ms. Seidler describes the remedies available to her and to other 

independent artists as the equivalent of being handed an umbrella 

and being told to stand under Niagara Falls. 

Despite the diligent efforts of creators to police against illegal 

streaming of their works, the problem is only growing, in part, because the risk to operators of such sites is so low. Law enforcement 

agencies don’t readily take on such cases because with limited resources, misdemeanor crimes are just not a priority. 

So we applaud the Subcommittee for its focus on harmonizing 

the penalties applicable to illegal streaming with those applicable 

to other forms of infringements, and we stand ready to assist you 

in your work. 

[The prepared statement of Ms. Aistars follows:] 

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Mr. GOODLATTE. Thank you. 

Mr. O’Leary, welcome. 


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TESTIMONY OF MICHAEL P. O’LEARY, EXECUTIVE VICE PRESIDENT, GOVERNMENT AFFAIRS, MOTION PICTURE ASSOCIATION OF AMERICA 

Mr. O’LEARY. Thank you. Mr. Chairman, Ranking Member Watt, 

Members of the Subcommittee, I appreciate the opportunity to testify today on behalf of the Motion Picture Association of America 

and our member companies regarding online streaming and the 

role that it plays in global theft. 

The U.S. motion picture industry plays a unique role in today’s 

American economic infrastructure. We provide high-paying jobs to 

workers in all 50 States. We fuel small business growth. We inject 

capital at the State and local level, and we are one of the few industries in the United States that has a consistently positive balance of trade around the globe. 

High-speed broadband networks present tremendous opportunities for exchanging information and ideas. Unfortunately, as you 

have heard today, the laws and regulations put in place to protect 

consumers and innovation in the physical marketplace have not 

kept pace with the growth of illegal conduct online. As a result, a 

key foundation of American industry, the expectation that hard 

work and innovation is rewarded, is imperiled by thieves that steal 

America’s creative products and enrich themselves along the way. 

Currently the most pernicious forms of digital theft occur 

through the use of so-called rogue websites. These are increasingly 

sophisticated websites that look to the untrained eye to be legitimate. They use legitimate payment processors like Visa and 

MasterCard and PayPal, and they run legitimate advertising. Frequently they offer reward programs for frequent buyers who purchase their illegal wares. Streaming technology is rapidly becoming 

the most popular mechanism for transmitting stolen content on 

these rogue sites. 

I want to be very clear at the outset, that the subject that we 

are here to talk about today is not a debate between technology 

and innovation and the creation of content. The issue before us 

today is about crafting a policy that favors legitimacy over theft, 

about promoting and preserving creativity and production and punishing people that seek to profit through stealing the hard work of 

others. 

Streaming technology is an emerging way to deliver content and 

information to consumers the world over, and it is a technology 

being used and embraced by our industry. There are more than 35 

legitimate business ventures such as Hulu, Crackle, Netflix, and 

HBO GO using streaming to deliver their products today. 

In December of 2009, the full Judiciary Committee held a hearing on this very issue in the context of live sporting events. In the 

year and a half since that hearing, the problem has gotten worse. 

And it is a problem that doesn’t just affect live sports events but 

all forms of audiovisual entertainment from live transmission of 

television programming to streaming of major motion pictures. 

In preparation for today’s hearing, I visited one of the websites 

that I was talking about. If you go to that website, you will see a 

number of interesting things. For example, there were a number of 

comments by users that are waiting in anticipation for an illegal 

copy of a movie that will be released this coming Friday. It is not 

37 

in the theaters until Friday, but they anticipate that they will be 

able to see an illegal copy in the next 24 to 48 hours. 

It also had the top three box office films from last week available, Hangover II, Kung Fu Panda, and Pirates of the Caribbean. 

There is really something for everybody in that trio. And they were 

all available from multiple links to other sites where you could 

watch any of those movies. 

What was particularly interesting was a ‘‘coming soon’’ page 

which detailed the movies that will be available in the coming 

days. It listed four blockbusters which will be released in the 

United States between June 10th and July 1st of this year. There 

are over 800 people who have put comments on the site saying that 

they can’t wait to see those movies. Those are movies that won’t 

even be out for 3 or 4 weeks and people are already queuing up 

to see an illegal copy. 

A recent review of this very same site found that 33 percent of 

all traffic generated from the search query ‘‘free streaming movies’’ 

ended up on this site. This site and the people who run it are not 

engaged in innovation in any way, shape, or form. What they are 

engaged in is theft. And this is just one example of the types of 

criminal infringement we confront every day. 

As you have heard through the other witnesses and through the 

Chairman’s statement, the law in this area in the past has gone 

through different changes. We have typically focused on distribution and reproduction. There was the NET Act which was very important, and there was also the ART Act which was very important. But today, as copyrighted content is increasingly streamed 

online, uncertainty remains whether Internet streaming can be 

prosecuted as a felony. This results in a significant gap in the enforcement of this Nation’s intellectual property laws which must be 

addressed legislatively. 

This point was made clear earlier this year by the U.S. Intellectual Property Enforcement Coordinator when she recommended 

that the Congress clarify that infringement by streaming or by 

other means of similar technology is a felony or should be made a 

felony in appropriate circumstances. This is a real problem with 

real consequences for American creators and workers. And we applaud the Committee’s decision to address this threat. 

If we fail to address this problem now, in addition to leaving a 

sizeable gap in the U.S. law, we will promote additional theft of 

America’s creative work by allowing emerging means of illegal distribution to persist without remedy. 

We will permit an unjustified technology-specific disparity between the forms of infringement that have increasingly similar 

commercially destructive impacts. 

Third, we will ensure that very few, if any, Federal prosecutions, 

even for the most blatant and notorious global intellectual property 

criminals, will go forward as Federal prosecutors and investigative 

agencies will be unlikely to devote limited resources to cases that 

will net, at most, a misdemeanor conviction. 

Fourth, failure to act will harm America’s long-held role as a 

world leader in protecting and promoting creativity by signaling to 

the rest of the world that our products are not protected in the online world in the same manner that they are in the physical world. 

38 

The failure of the United States to move against criminals engaged 

in streaming will undoubtedly result in less enforcement around 

the world, and that will be particularly true in cases where you 

have an American victim. 

Fifth, the failure to move forward at this time will stifle innovation and creativity by allowing thieves that utilize streaming to 

continue to have an advantage in the online marketplace. We must 

set policies that favor legitimate business models over theft. 

These are consequences which are all avoidable if we work to 

fashion a comprehensive and focused legislative response. We look 

forward to working with this Committee to achieve this critically 

important goal. 

Again, I want to thank the Committee on behalf of the members 

that I represent for holding this hearing and for allowing us to testify today. 

[The prepared statement of Mr. O’Leary follows:] 

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Mr. GOODLATTE. Thank you, Mr. O’Leary. 

I will begin the questioning with a general one directed to all of 

you. 

Do you agree with the principles and policies embodied in the 

NET Act and ART Act. And specifically, do you agree that a prosecutor should have discretion to pursue a felony indictment in a 

streaming case where the evidence shows a violator willfully comVerDate Aug 31 2005 10:45 Mar 06, 2012 Jkt 000000 PO 00000 Frm 00048 Fmt 6633 Sfmt 6601 H:\WORK\IP\060111\66614.000 HJUD1 PsN: DOUGA

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mitted large-scale infringement but there is no evidence of a commercial motive? 

Ms. Pallante, we will start with you. 

Ms. PALLANTE. Yes, thank you for the question. 

I do. I think the NET Act and the ART Act were quite responsive 

to evidence of online infringement in 1997 and 2005, respectively. 

But today we know that streaming is a primary and growing market for copyright owners. And I will say as a person who has young 

teenagers in my house, not everybody thinks in terms of copies 

anymore. Streaming is a major way of receiving content and only 

likely to get bigger. 

So as a pure policy issue, it is a question of parity. We have certain tools available to prosecutors for reproduction and distribution 

which once were the primary means of exploitation. We don’t have 

the same tools available for the right of public performance. 

Mr. GOODLATTE. Thank you. 

Ms. Aistars? 

Ms. AISTARS. Yes. Thank you, Mr. Chairman. 

I agree with Ms. Pallante’s comments and I would also add that 

I think that the ART Act and the NET Act were both motivated 

by very important policy considerations and that the Committee 

was very thoughtful in crafting a solution to those policy questions. 

I know from our experience that there are definitely hard core 

uploaders, hard core opponents of copyright issues who sometimes 

work in organized release groups to upload content for purposes of 

notoriety or who otherwise aren’t necessarily motivated by private 

commercial gain. And those sorts of uploads and distribution by 

streaming by these rogue websites are equally harmful to creators 

like Ms. Seidler and independent creators throughout this country 

who don’t have the resources to go after those sites and don’t have 

the ability to be taken seriously by those sites when they raise 

their concerns with them. 

Mr. GOODLATTE. Indeed, those were the facts in the LaMacchia 

case that motivated the NET Act, which I introduced almost 15 

years ago. 

Mr. O’Leary? 

Mr. O’LEARY. I would answer yes to both of your questions. The 

policy base that went into both the decision to pass the NET Act 

and the ART Act were sound at the time, and they are still sound 

today. 

Mr. GOODLATTE. Let me direct another question to all three of 

you. 

Are you satisfied that the pre-release provision in current law 

clearly addresses unauthorized streaming of live performances such 

as live pay-per-view sporting events? If not, how would that provision need to be amended in order to encompass infringement occurring simultaneously with the live performance, and do you think it 

should be clear that these types of performances should be covered? 

We will start with you. 

Mr. O’LEARY. Mr. Chairman, I think that it should be made clear 

that those types of performances should be covered. I think that 

the ART Act is very effective at protecting products which will have 

a subsequent distribution to the public like a motion picture, but 

46 

when you are dealing with live sporting events and also with television programming, it has proven to be perhaps less effective. 

And so I would encourage this Committee in your deliberations 

to look very closely at both of those factors and see if there are not 

amendments necessary to fulfill the full intent of the ART Act and 

cover those types of activities. Your hearing in 2009 focused on the 

harm caused to live sports. It is also a problem caused for people 

that create television, and we would welcome the Committee looking at that issue. 

Mr. GOODLATTE. Thank you. 

Ms. Aistars? 

Ms. AISTARS. I don’t have much to add to Mr. O’Leary’s response 

other than to note the probably obvious to the Committee point 

that with respect to a sporting event or other live events—it is very 

hard to have a pre-release of that sort of an activity since you have 

got to wait for the event to begin in order to stream it. 

Mr. GOODLATTE. Quite right. 

Ms. Pallante? 

Ms. PALLANTE. Yes, I completely agree. The current law is focused on distribution of copies as the intended marketplace, and as 

we know, that is not always the case for some kinds of works. 

Mr. GOODLATTE. Further to you, what exclusive rights under 

copyright are implicated by the streaming of copyrighted works? 

What protected rights are infringed by illegal streaming? 

Ms. PALLANTE. Thank you for the question. 

Potentially three exclusive rights could be infringed but in different ways and potentially with different outcomes under the law. 

Starting with perhaps the major right for most streaming, we are 

almost always going to have the exclusive right of public performance at issue. Beyond that, it is also possible that the right of reproduction could be implicated. For example, there could be a copy 

on the sender’s server. There could be a buffer copy implicated. 

And it is possible also, though not likely, with the distribution right 

that perhaps a file is being sent through the stream that resides 

on the receiving person’s computer. 

The issue, though, is does Congress want prosecutors to be able 

to address these kinds of issues, illegal streaming, through the 

back door or the front door. In other words, even if prosecutors 

could cobble together a case focused on the reproduction and distribution right, which personally I think is very difficult, is that 

really the right policy outcome? 

Mr. GOODLATTE. Thank you. 

And one last question. Mr. O’Leary, you noted in your testimony 

that illegal streaming is a problem that affects not just sports but 

all forms of audiovisual entertainment from live retransmission of 

television programming to streaming of major motion pictures. 

What industries in particular are impacted by illegal streaming 

and have these industries taken any action on their own to address 

the issue such as civil litigation or non-litigation enforcement such 

as notice and takedown? 

Mr. O’LEARY. Absolutely, Mr. Chairman. The industry that I represent, the American motion picture and television production industry—we frequently avail ourselves of civil remedies. In fact, we 

47 

are frequently criticized for doing that. But we believe that it is an 

important part of the IP enforcement regime. 

It is important to state up front that what we are talking about 

today is the criminal enforcement. Criminal enforcement is a very 

small piece of a much larger IP enforcement regime, and we take 

our responsibility under the civil part of that very seriously. We 

have moved against a number of sites that are engaged in this type 

of activity in different types of civil settings, and we would be 

happy to provide the Committee with further specifics on that following the hearing. 

I think that, as I mentioned in my previous answer, this implicates not just motion pictures. It implicates sports. It implicates 

television. Television has a significant problem, frankly, with this 

type of thing. You can have a situation where you could be sitting 

in your home in Virginia watching a show and it could be streaming to someone on the West Coast before it is even aired on the 

West Coast, and that has a significant impact. 

And so I think also another factor to look at is it is not just the 

major studios that I represent. This has a significant impact on 

independents and smaller creators as well, a number of whom Sandra identified in her opening remarks. So there really is no part 

of the creative community that is immune from the harm of 

streaming. 

Mr. GOODLATTE. Thank you. 

I now recognize the gentleman from North Carolina, Mr. Watt. 

Mr. WATT. Thank you, Mr. Chairman. 

I think I started to develop a reputation on this Committee as 

one who tries to get diverse views, and we had trouble getting diverse views on this issue, as the panel seems to be all in one location, one position. Even when I disagree with the folks who are on 

one side or the other, I think the purpose of these hearings is to 

educate ourselves and understand. But all of you seem to be saying 

the same thing. 

Is there somebody out there who is not a crook who would be 

saying something different I have asked myself, and I haven’t come 

up with an answer, although there seems to be some mounting objection to a Senate bill that prohibits streaming as a public performance by electronic means. I am advised—this is secondhand, so 

I apologize to the cable people if I am misrepresenting their position. But they seem to be arguing that public performance by electronic means is too broad a language. 

Mr. O’Leary, can you give me your perspective on that? They 

seem to be saying that it would allow criminal prosecutions of executive managers of companies which are in commercial licensing 

disputes with programmers. Does that have any credibility? Or am 

I misunderstanding what they are saying? 

Mr. O’LEARY. Mr. Watt, I don’t want to characterize what they 

are saying. From my perspective, you are not misunderstanding 

what they are saying. From the perspective that I look at this, I 

do not believe that that is a legitimate concern for a number of reasons. 

First of all, if you look at the current situation in the law, there 

are any number of commercial disputes between producers and distributors of content. And those inevitably always take the form of 

48 

some type of civil dispute. There are disagreements over what the 

contract says, what the license says, those types of arrangements. 

Under the current law, for reproduction and distribution, to my 

knowledge there has not been one cable company executive prosecuted as a result of anything that was going on in regard to those 

disputes. 

Looking at the streaming issue, this is, as you have heard from 

the other witnesses, just the logical extension of the existing law. 

Mr. WATT. Well, I can’t say that I disagree with you. I just wanted to make sure I understood. And had I known prior to scheduling 

all the witnesses, I would have invited whoever has a different position to come and state that position. I am just trying to understand it. 

The more important question, it seems to me, is how we get to 

foreign culprits. Can I have each one of you give me your thoughts 

on how we do that? Because a lot of this stuff that is going on offshore or by websites or through electronic means that are offshore 

are very, very difficult to get to. 

Mr. O’LEARY. Mr. Chairman, I think you raise a very important 

point. This is a global problem and we need to deal with it in a 

global way. I think there is a number of things that we can do. 

One, this country has historically been a leader in strong enforcement of intellectual property rights. Setting the right precedent 

here, making it clear to the rest of the world that in the United 

States we take this seriously and we protect creative works will 

allow the Administration, any Administration, to go around the 

world and to spread that message and to get other nations to put 

similar laws in place. 

I also think—and this is based on my experience at the Justice 

Department—having these laws in place is an enforcement tool 

that allows our Justice Department to work with their contemporaries in other countries. When I was at the Justice Department, 

we did one case that involved police activity in 12 nations dealing 

with an organization which was global—— 

Mr. WATT. But is there any way we can do this statutorily here? 

Anybody have any suggestions on that? We are having that problem in a number of different contexts it seems. Is there anything 

we can do domestically to really get at this? 

Mr. O’LEARY. As a practical matter, Mr. Chairman, if you don’t 

have the law in place here, there is virtually no chance that a foreign law enforcement agency will even have a discussion with you. 

So that would be the first step I would think. 

Mr. WATT. Any other ideas from either of the other two witnesses? 

Ms. PALLANTE. Well, I would just say as a kind of global issue 

that the rogue websites discussions that this Committee has already had this session and this streaming issue are related and to 

some degree overlap, but they are both important. So for streaming, even if the streaming is happening abroad, keep in mind that 

it is often U.S. programming that we are talking about. 

I don’t want to prejudge the issue of unintended consequences 

and whether there should be carve-outs, for example. But my impression is that they are not necessary because, again, we are in 

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49 

quirement that the behavior be willful and we have the discretion 

given to the Department of Justice. 

Mr. WATT. I am out of time, but I want to clarify. I am just advised that NCTA was invited to be a part of this hearing and they 

declined our invitation. I would just say to them publicly if they 

want me to understand what they are saying, they better come and 

talk to me because I don’t think it has much credibility right about 

now with me. Maybe I just don’t understand it. So I am sending 

that shot over the bow and publicly right now. 

I yield back, Mr. Chairman. 

Mr. GOODLATTE. I thank the gentleman. 

And to clarify further, I share the gentleman’s interest in hearing other perspectives on this. A number of other major companies, 

cable, satellite, and so on were invited and all declined. 

We have a vote on with just 3 minutes remaining, and the Committee will stand in recess until the completion of the votes. We 

will resume as soon as the votes are over. 

[Recess.] 

Mr. GOODLATTE. The Committee will reconvene. 

And the Chair recognizes the Vice-Chairman of the Subcommittee, the gentleman from Arizona, Mr. Quayle. 

Mr. QUAYLE. Thank you, Mr. Chairman, and thank you for holding this hearing. 

Ms. Aistars, we have had a couple of hearings on this matter, 

and a lot of times we were dealing with the large economic implications that affect a lot of U.S. companies. And they are huge and 

they are broad that happen because of these parasitic websites. But 

the one thing that you brought up and I wanted to kind of go into 

a little further is if we don’t do anything right now in terms of increasing the penalties, what happens in the future to the creativity 

that occurs in this process? Because like you said, it is not just the 

large companies, the large motion picture studios, it is also the individual creators that are getting hit by this because it seems like 

it will be creating a disincentive for them to actually create things 

because they won’t be properly rewarded for their efforts. 

Ms. AISTARS. Thank you for the question, Mr. Quayle. 

I think you have outlined it exactly correctly. You can look at the 

independent artists and creators as the canary in the coal mine for 

the rest of the creative community. They are the ones that are 

going to be hit first by any infringement. They are the ones that 

have the lowest level of resources to combat infringement by these 

sites. 

I know in my past experience I have worked with large teams 

at big corporate entities that pursue online infringements of copyrighted works, and the resources that those entities devote are astounding in terms of pursuing notice and takedown processes, 

cease and desist letters, negotiations with sites, and so forth. 

If you are an independent artist or creator, you don’t have those 

resources at your disposal. You don’t usually have the money to 

hire a lawyer to help you through the process. And more importantly, these people make their living by actually creating. So if 

you are spending your whole day on the phone and on the computer trying to knock down these illegal streaming sites, then you 

50 

are not doing what you are trained to do. So you are exactly right. 

It will impact creativity in the United States. 

I would also note, for instance, Ms. Seidler’s example is a very 

good one, and it is instructive about the impacts of illegal piracy, 

streaming by rogue websites on the creative community as a whole. 

Oftentimes that is where independent artists and creators get their 

start in these small, independent projects. They cut their teeth on 

this work and they move on to bigger projects and have more resources to devote to them. So if you cut them off at the very beginning stages of their career, you are also depriving our community 

across the country of those voices. They just won’t be heard. 

Mr. QUAYLE. Thank you. 

Mr. O’Leary, a lot of the young people right now have come up 

in an age where they can get pirated music, pirated movies at their 

fingertips. They don’t really realize that there is a place where you 

are supposed to be paying for them. 

Now, if you are going to have felony penalties put on this, how 

does that actually help dissuade those young people? And actually 

on the demand side, will it have the effect necessary to actually be 

able to make a dent in the piracy that is going on right now? 

Mr. O’LEARY. It is a good question, Mr. Quayle. I think that we 

don’t look at felony penalties as a silver bullet. They are part of a 

larger effort to deal with this problem. 

You are exactly right when you talk about the problem of young 

people wanting things now, wanting them for free. I have two 

young boys. They have grown up in that environment. And as a 

parent, obviously, you do the best you can and you tell them not 

to steal. But there are a lot more temptations perhaps than there 

were when I was a kid. 

But what this deals with is kind of a different part of the same 

issue, and that has to do with people that are putting massive 

amounts of illegal content into the environment which people can 

then ultimately see. So you would take different approaches in regard to both of the groups that are in your question. 

Obviously, dealing with the criminal element, there is probably 

no amount of education in the world that is going to stop a rogue 

website operator from being one. He is in it for the profit and trying to do the different things that he is trying to do to make money 

off of other people’s hard work. 

With young people, I think you are starting to see a recognition 

that there—a part of our responsibility and it is something we take 

very seriously is educating kids at a younger age and teaching the 

difference between right from wrong and showing them that there 

are legitimate alternatives out there. In my testimony, I mentioned 

that there are at least 35 legitimate sites in our industry alone 

that are now using streaming. We have a responsibility to get that 

message out there so that kids have someplace else to go and that 

they can actually get things in a legitimate fashion. 

So these are all part of a large puzzle that we are trying to deal 

with. The felony piece that we are talking about today is very important, but so is the educational piece that your question references. 

Mr. QUAYLE. This isn’t about streaming, but do you see any other 

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ing up on the horizon? We are dealing with streaming now and 

technology advances very quickly, but do you see any other mode 

of transmission that we should be taking notice of? 

Mr. O’LEARY. Well, I would suspect that right now somewhere in 

the city there is probably a 14- or 15-year-old who has already got 

the next iteration in his head and it is bouncing around and probably 6 or 7 years from now he will be a multi-millionaire because 

he is able to bring that to fruition. 

But I think that your question evidences an important part of 

this debate which is that if we do deal with this problem, it is important to maintain kind of the tech-neutrality approach that the 

copyright code has because if you don’t do that, then in 5 or 6 

years, when there is the next version of streaming, we will be right 

back in this room trying to deal with that, and 5 years after that, 

the next iteration. So I suspect that there are smarter people out 

there than me who can tell you what the next version will be. I 

think from a policy perspective, we need to put down kind of a 

broad imprint that allows us to deal with whatever that is. 

Again, we are not against technology. We support technology. 

This is not a debate between us and the technology industry. This 

is a debate between the creators and the people who are stealing 

from the creators. 

Mr. QUAYLE. Thank you. 

Thank you, Mr. Chairman. I yield back. 

Mr. GOODLATTE. I thank the gentleman. 

The Chair recognizes the gentleman from California, Mr. Berman, for 5 minutes. 

Mr. BERMAN. Since I came late, if it is all right, I would yield 

to my—without waiving my—— 

Mr. GOODLATTE. We will come back to you. 

Ms. Chu, are you also going to defer down to Ms. Lofgren? She 

was here before you, but I was instructed to go by seniority on your 

side of the aisle. It is your choice. 

We are going to recognize the gentlewoman from California, Ms. 

Lofgren, for 5 minutes. 

Ms. LOFGREN. I just want to make it clear I would be happy to 

go in seniority order, but I appreciate being recognized. 

Professor Seidler has been mentioned. I had a chance to meet 

with her for an extended period of time in my district office which 

was very helpful. And what happened to her was completely wrong. 

It is just not right what happened to her. There is no question 

about it. 

In our extensive conversations, it is clear to me, given what happened to her, if this had been the law, it wouldn’t have kept that 

from happening to her. And really, we got into a big discussion 

about the need to follow the money really. That is the answer. You 

follow the money. You are not going to prevent all crime through 

criminal law statutes. I mean, we know that from everything else. 

But if you follow the money, that is our best chance I think to get 

ahead of this whole situation. 

I have a couple of questions, and I am going to direct them all 

to the Register because she is the neutral party. And that is not 

negative about the other witnesses. They are advocates. They have 

52 

every right to be advocates. But the Register is the neutral party 

here. 

I wanted to explore potential for collateral damage on innovation. 

It has been suggested—and I agree—that we do not want to deter 

creators. We also do not want to deter innovators. And so here is 

the question about how the statute could play out. I am going to 

go where the Ranking Member did not. There are two cases that 

I know of—there may be others—where there is an argument about 

whether something is infringing or not. 

In one case, Viacom sued Time Warner Cable over its iPad app. 

Now, Time Warner Cable thinks that this just allows their own 

cable customers to watch their cable content on the iPad. Viacom 

says no. And they are in court, and that will be settled in court 

hopefully, whatever the proper way is. I don’t have a side in that 

litigation. 

The other has to do with the MPAA has sued a company called 

Zediva. Zediva has come up with a novel way to stream movies, 

and it is based on the ability to rent an individual DVD. And what 

they have done, apparently from the press reports is they have 

bought physical DVD’s and they have a whole bunch of machines, 

and they are streaming them. And they think that that fits within 

the copyright law. MPAA disagrees. And again, that is in court. It 

will be settled there. 

Here is the question. The companies that are engaging in these 

activities are certainly doing it willfully. They know what they are 

doing, but they don’t believe that they are infringing. I don’t want 

to just trust the prosecutors. I want to make sure that we have 

some protections in here so that people who believe in good faith 

that they are pursuing a lawful business model don’t get caught up 

in the criminal justice system when really it is a civil dispute. It 

needs to be settled civilly. 

I also have concerns about liability for people who are not directly infringing, and let me give you an example. YouTube has lots 

of stuff, and I think they do—it has been acknowledged by other 

witnesses on other panels. They are making an aggressive effort to 

try and get infringing content off of their site. However, they get 

lots of notice and takedown notices, and they comply readily. The 

volume of notice and takedown really is an indicator of knowledge, 

and the question is with that level of knowledge, could they be 

prosecuted because they did not successfully remove all content. 

And the reason why I am asking this question is that John Morton, the Director of ICE, in a letter to me said they completely disregard the DMCA in the prosecution of crime. And the fact that a 

technology company has made every effort to stem infringement is 

meaningless to them, they are going to prosecute them anyhow. 

And so the question is on innovation, if you know that somebody 

might be using your site—say you are Facebook or Twitter or 

Google or YouTube—that there could be infringing sites despite 

your best efforts, you are going to be afraid to innovate. You are 

going to be afraid to have that new technology. 

So do we need a safe harbor here as we did in DMCA? Do we 

need to closely define—because you can’t just say we will trust the 

prosecutors, they would never do a bad thing because the chilling 

aspect is the possibility of criminal obligation. And it is not just 

53 

that the individuals who are largely like 23 years old might be deterred but they will never get venture capital to actually build the 

business. And so you could end up destroying tech innovation even 

though I am absolutely sure that is not the motivation of any party 

here. 

Could you address those issues? 

Ms. PALLANTE. Yes, thank you, Congresswoman Lofgren. 

Those are very important questions, particularly the issue of unintended consequences, and that is why we are having this discussion. 

But let me maybe step back and at the risk of sounding like a 

copyright lawyer start again with what we are looking at as a matter of statutory law. So nobody is suggesting that the Department 

of Justice should, even if they were inclined to and had the resources, start going after actors who, as part of their business 

model, inadvertently may implicate the right of public performance 

and, for that matter, already may implicate the rights of reproduction and distribution. 

There are two threshold prongs. One is willfulness and that is 

not defined in the Copyright Act, but I can read to you for some 

peace of mind from Nimmer on Copyrights. It is in my view a pretty high standard. So willfulness in terms of copyright infringement 

is voluntary, intentional violation of a known legal duty, not accidental, not inadvertent. 

Ms. LOFGREN. Could I interrupt? If I may indulge the Chairman, 

on the duty part, if you could address that issue because this is a 

new frontier in some of these areas. And I think it is still an unknown issue. ICE and the DOJ—well, ICE went after—I don’t 

know that the prosecution has occurred—search engines. Nobody 

ever thought search engines had any liability, and yet there was 

a law enforcement action. So what is the duty there? Because we 

had a whole different scheme that we put in place in the DMCA 

when we acted in the 1990’s. 

And I am sorry for interrupting, but if you could address that as 

well, it would be very helpful. 

Ms. PALLANTE. Certainly. And yes, the standard for civil infringement is very different from the standard for criminal prosecution. 

But in addition to willfulness and understanding that there is a 

clear duty, say, in this instance to obtain permission before streaming because it implicates the copyright interest that is the public 

performance right—under current law. Let me do it in reverse. 

Under current law, even if you are implicating the public performance right and you are doing it for commercial advantage and 

with a profit motive, at most that is a misdemeanor, and that is 

at odds with the law for the same activity with respect to reproduction and distribution. So I really do see it as a parity issue. I see 

it as an extension of the work begun with the NET Act in 1997 and 

the ART Act in 2005, and it is timely now because streaming is—— 

Ms. LOFGREN. I understand that. And I actually supported those 

measures as you may or may not recall. 

But what is new here is prosecution for activity that no one ever 

thought was a violation of law. 

Mr. GOODLATTE. The time of the gentlewoman has expired. 

54 

The Chair recognizes the gentleman from North Carolina, Mr. 

Coble, for 5 minutes. 

Mr. COBLE. Thank you, Mr. Chairman. 

Ms. Aistars, you refer in your testimony to an outsized impact on 

independent artists and creators. Elaborate on that, if you will, in 

a little bit more detail. 

Ms. AISTARS. Sure. As I was referring to in my testimony, Ms. 

Seidler is a very good example of what independent artists across 

the country face when dealing with these companies and websites 

that stream their works. It is an outsized impact on these independent creators because of the lack of resources they have to pursue these bad actors civilly and because of the lack of attention 

that these types of websites are willing to afford them as independent creators. 

It is also an outsized impact on creativity in this country generally because these independent projects are where creators kind 

of get their start and hone their skills and their craft. 

These are also the projects that are difficult to fund. They are 

self-funded. They are independent voices that probably wouldn’t be 

heard in a big studio environment perhaps. So if those voices disappear from our culture and our communities, we will all be the 

poorer for it. 

Mr. COBLE. Thank you. 

Mr. O’Leary, piracy has a chilling effect on innovation. Can you 

predict any consequences that we should expect if illegal streaming 

continues unabated? 

Mr. O’LEARY. Thank you, Mr. Coble. 

I think certainly one of the consequences if it continues unabated 

is that you will see a dramatic—the shift is already happening. 

People engaged in content theft are shifting to streaming, and that 

will become probably the primary and the most often used means 

for engaging in this type of piracy not just in the United States but 

on a global basis. 

I think that the amount of resources that are put into trying to 

deal with content theft right now, certainly for the studios that I 

represent, is an enormous number, and that is money that is not 

going into production. That is money that is not going into innovation. One of the things that we like to talk to people about—you 

are talking about the impact of content theft. It doesn’t impact the 

names you see on the marquis when you walk into the theater, but 

if you sit through the movie and you watch the credits at the end, 

that long list of people that you have never heard of that go by, 

they are the ones who feel the pinch because there is less production. There is less opportunity to work. A lot of those people work 

project to project. They may string together six or eight projects a 

year. If a studio has to cut back because they are not having a 

chance to recoup their investment, those are the people who are 

going to feel it the most acutely. So that is going to be the impact 

overall. 

Mr. COBLE. I thank you, sir. 

Finally, Ms. Pallante, what exclusive rights under copyright are 

implicated by the streaming of copyrighted works, and what protected rights are infringed by illegal streaming? 

Ms. PALLANTE. Thank you, Mr. Coble. 

55 

Three exclusive rights. In the context of streaming, we are talking about one that is of growing importance for certain kinds of 

works, and that is the public performance right. That is very important to works, for example, like the movies that Ms. Aistars is 

describing and Mr. O’Leary, as well as music, as well as television 

programming, and live sporting events. They are streamed. That 

implicates the public performance right. 

It is also possible that the reproduction right is implicated and 

it is conceivable that the distribution right could be implicated, but 

probably not in the ways that Congress intended. So, for example, 

current law talks a lot about the reproduction and distribution of 

copies of works because that is the way that copyright owners primarily exploited their copyright interest in the past. Today when 

we talk about illegal streaming, we are talking about buffer copies. 

We are talking about copies left on servers, not the copies that are 

out in the marketplace doing damage. The damage isn’t coming 

from the copies. The damage is coming from the streaming. 

Mr. COBLE. I thank you. 

I yield back, Mr. Chairman. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

The Chair will again turn to the gentleman from California, Mr. 

Berman, and ask if he would like to be recognized for 5 minutes. 

Mr. BERMAN. On behalf of the Ranking Member’s desire, I will. 

Ms. Lofgren and I have had discussions around these issues for 

many, many years, and I throw out a different scenario. We want 

to incentivize creators but not necessarily creators of pornography 

or materials on how to make nuclear weapons. We want to 

incentivize innovators, but not necessarily all—I mean, our whole 

export control laws and a lot of other regulations we have are to 

discourage and disincentivize certain kinds of innovators. So I am 

not so sure the sweeping generalization will necessarily decide the 

issue. 

On this issue of civil liability under DMCA versus criminal liability, it seems to me—well, first of all, the fact that there is a safe 

harbor in DMCA done at a certain time, given a certain technology, 

may not mean that is the exact, correct safe harbor 10 or 20 years 

later based on the advances in technology. I just throw that out. 

This issue isn’t coming up in this hearing. 

But secondly, hypothetically what if someone was marketing a 

process by which people would put—encouraging people to put infringing material on their site, saying then, oh, and we will comply 

with the notice and takedown, but they had a willful intent to disseminate copyright protected material. Why under criminal law 

couldn’t that under the right circumstances meet the test of a 

criminal violation without—why should Customs automatically assume that any conduct should—if you comply with notice and takedown, you have a safe harbor from any of your conduct, even if it 

has nothing to do with getting a notice and taking it down. I throw 

that out perhaps to the Copyright Office. 

And then just to pursue a line of questioning that I think Mr. 

Watt got into. 

Streaming, by the way, is not exempt from copyright law as Ms. 

Pallante said. Its offense is a misdemeanor offense. 

56 

As we try to make consistent the application of law over different 

technologies, whether they are viewed as a reproduction, a distribution, or a public performance, what would the person who was 

against that say here to say there should be a difference between 

streaming as a public performance—and even that, of course, is a 

matter under some discussion—versus a reproduction and distribution? The witness who isn’t on the panel—what would they give as 

their most compelling argument? 

And is there something—as we draft legislation, if we decide to 

try and get a consistent approach, are there things we need to be 

careful of in drafting the legislation? 

Ms. PALLANTE. Thank you, Mr. Berman. I will start. 

I suppose that a person not on this panel might say there is a 

reason that the public performance right has been treated differently since 1897 under criminal law. That is because the greatest harm to copyright owners occurs through reproduction and distribution. And I think our answer is the time has come for Congress to be reasonably out in front of this issue, and I say that 

knowing that the content owners next to me do not believe that we 

are in front of this issue, but I think relatively speaking, it 

shouldn’t be the case that we wait until the illegal streaming activity has so terribly proliferated that we can hardly make a dent. 

They might also say that there haven’t been any prosecutions for 

illegal streaming. There haven’t been any attempts that at least we 

know about. Again, I think that is not a symptom that it isn’t an 

issue so much as it is not easy to get the attention of the Department of Justice to go after illegal streaming and to expend resources when the most that they can do is bring misdemeanor 

charges. 

Ms. AISTARS. Congressman Berman, in answer to the beginning 

part of your question where you raised the possibility of a site actually going out there and incentivizing people to contribute copyrighted materials to an illegal rogue site, I would just like to comment that those sites actually do exist today. I put an example of 

one of them in my testimony which was streaming Ms. Seidler’s 

work, as well as the work of many, many other copyright owners. 

This is only one of numerous such sites. But this particular site 

was offering cash rewards for people who were uploading the most 

popular files. So if you got 1,000 streams of a particular file that 

you had uploaded, you would get a cash incentive from that company. So it shows that you are, in fact, correct, that these sorts of 

risks do exist today and that there are companies out there that 

are incentivizing people to aid in their piracy. 

Mr. O’LEARY. Mr. Berman, I think that your hypothetical that 

you posited at the beginning of your question highlights the significant drawbacks to creating exceptions to the criminal law. I think 

as was alluded to earlier in the hearing, there are a number of 

safeguards in place that will protect legitimate businesses that are 

in legitimate business disputes from prosecution. The willfulness 

standard has been mentioned. There are a number of activities 

that lawful businesses engage in. 

And I think having sat in those conversations where you are 

making charging decisions, I can also tell you that Federal prosecuVerDate Aug 31 2005 10:45 Mar 06, 2012 Jkt 000000 PO 00000 Frm 00060 Fmt 6633 Sfmt 6601 H:\WORK\IP\060111\66614.000 HJUD1 PsN: DOUGA
57 

tors do not make decisions rashly and they do not make decisions 

without looking at all the evidence. 

One of the things which I think is important to note is if you look 

at the website of the Computer Crime and Intellectual Property 

Section, there is a victim referral sheet that they would ideally like 

everyone coming forward with a criminal claim to fill out. Among 

the list of questions on that sheet are is this part of a civil dispute 

or do you anticipate this becoming a civil dispute. The reality of it 

is, most prosecutors—if you answer yes to either of those questions, 

it is a big red flag and you are not going to get embroiled in something like that. 

The hypothetical you were talking about would be that instance 

where someone maybe is engaging in some type of sham or something. They are actually engaged in a criminal act but they are trying to avail themselves of kind of the patina of legitimacy that a 

legitimate company would have in order to avoid prosecution. The 

way the criminal law in this country works is the prosecutors are 

vested—Congress writes the laws, obviously, and then prosecutors 

have the discretion to enforce those. The scenario that you are talking about where someone has set up kind of a fraudulent scenario 

to pretend they are a legitimate company—there is no policy reason 

that should not be prosecuted if the evidence is there. And that 

means meeting the elements of the crime: willfulness, commercial 

or private financial gain, and commercial scale impact, those types 

of things. So to answer that question, you have highlighted the 

very problem when we start to carve people out of the criminal law. 

I also think to highlight the point that Ms. Pallante made, as a 

practical matter, having been in these discussions, investigative 

agencies and prosecutors are just not going to spend resources on 

cases that are going to yield at best a misdemeanor. It just doesn’t 

get the attention. There is a ton of pressure on law enforcement 

and they are not going to have the time or the resources to do it. 

It is not a criticism of them. It is kind of a fact of the world we 

live in particularly in the last decade. They are given more and 

more things to do every year and it just doesn’t fit with the current 

approach to things. 

Mr. GOODLATTE. The time of the gentleman has expired. 

The Chair recognizes the gentleman from Pennsylvania, Mr. 

Marino, for 5 minutes. The gentleman has no questions. 

The gentlewoman from California, Ms. Chu, is recognized for 5 

minutes. 

Ms. CHU. Thank you, Mr. Chair. 

Ms. Aistars and Mr. O’Leary, you both talked about cyberlockers 

and the fact that it is one of the new places for hosting and disseminating illegal content. And there are companies like SideReel 

that claim that they are nothing more than a specialized search engine. They claim that they only link to content that they think 

users would find relevant, including legitimate sources like Amazon.com, iTunes, and Hulu. Any illegal content on their sites is 

hosted by other sources. More commonly they link to cyberlockers 

such as Megavideo which actually hosts the streaming video files, 

some legal and some not. SideReel claimed that they immediately 

remove links whenever they receive notice that it is directing people to infringing content. 

58 

So based on your experience, what is the best way to tackle sites 

that provide the links to the illegal content? 

Ms. AISTARS. Is your question what is the best way to handle the 

sites that provide links you mentioned out to some legal sites, and 

some sites that aren’t legal? 

Ms. CHU. Yes, that they are providing the link to some legal 

sites, but then also to the illegal sites. 

Ms. AISTARS. I mean, I guess I would say to begin with that I 

think the Judiciary Committee as a whole and this Subcommittee 

in particular has done an excellent job in setting out the criminal 

penalties that are applicable to all manner of websites in terms of 

addressing the policy considerations that one looks at to determine 

whether you should be bringing a prosecution or not, whether 

someone has met the threshold for being held criminally liable. 

And what we are looking to adjust here is simply a technical fix 

that one should not determine that a site is either in or out based 

on the fact that they are using streaming versus reproduction and 

distribution of a work. 

So I guess I would want to think this through a bit more closely 

and discuss this a little further, but my initial impression would 

be that one way to address these issues would simply be by adding 

the public performance right to all of the currently existing criminal provisions and then you would have the benefit of the protections that are already built into the ART Act and the NET Act that 

ensure that these are truly large-scale illegal reproduction operations and the infringers are acting willfully and there are commercial motives and that sort of thing. 

Ms. CHU. Mr. O’Leary, and then I would like to hear from Ms. 

Pallante on this. 

Mr. O’LEARY. I agree with what Ms. Aistars has said. There are 

instances out there, hypotheticals and different instances that 

arise, that are rarely black and white. And that is part of the process. 

As I said earlier, the vast majority of enforcement takes place on 

kind of the civil plane. When we reach out to sites and ask them 

to stop, the ones that are trying to do the right thing stop. Some 

don’t. Now, that may be a situation where we would proceed 

against them civilly, and in many cases, if not most cases, that resolves the problem in some fashion, assuming that you can actually 

get civil jurisdiction over them. 

When we make a referral to the Justice Department for criminal 

prosecution, it is not uncommon—and I did this when I was there 

and they do it now, as they should, but they will look at a case and 

say this doesn’t meet the requirements for bringing us a criminal 

case. You should handle this civilly or we are not going to take it. 

It is not as though the simple referral of a case to the Justice Department will result in it being prosecuted. In fact, I think you 

would find in a lot of cases there are probably as many cases denied as are accepted, if not more. So I think that depending on the 

facts and the circumstances, it is kind of a holistic approach to 

dealing with different facts and different types of activity. Again, 

though, the vast majority of it is going to be handled civilly. 

59 

What we are really talking about here is the willful, massive, 

clearly criminal type of activity, and that is the distinction that has 

to be made looking at the specific facts of the specific case. 

Ms. PALLANTE. Thank you. 

I will just add to that by saying cyberlockers are, in my opinion, 

the most difficult issue at play in general with online enforcement. 

They have a lot of very legitimate uses. A lot of people are very 

excited by the multiple things they can do and the multiple ways 

they can be used. It is possible that in the rogue website legislation 

in the follow-the-money approach, depending on the definition of a 

rogue website, you can get to them that way, at least the ones that, 

for example, may offer rewards programs to encourage the 

downloading and sharing of files that are found to be unauthorized. 

And it is possible in the criminal context that you could get to some 

kind of aiding and abetting if the providing of links itself is not sufficient for a cause of action. That is kind of the general answer. But 

it is an extremely difficult issue. 

Ms. CHU. Thank you. I see my time is up. I yield back. 

Mr. GOODLATTE. I thank the gentlewoman. 

Mr. O’Leary, I think you may have been wanting to respond to 

Ms. Lofgren’s question regarding the knowledge of infringement 

based upon receipt of DMCA notices. 

Mr. O’LEARY. Thank you, Mr. Chairman. I think it is a legitimate 

question and one that is worthy of discussion. I am not familiar 

with Mr. Morton’s letter, so I am not going to address that. I would 

note that it is the prosecutor who will ultimately make the charging decision, not the investigative agency, and that is true in any 

case. 

At the same time, I think again we keep going back to the fact 

that there are—— 

Ms. LOFGREN. Could the gentleman yield on that point? And I 

will be happy to make a copy of Mr. Morton’s letter available to 

you. 

But the point I am making is that if there is an enforcement action, somebody is arrested, that is sufficient to deter. I mean, even 

if there is no prosecution, that is definitely going to have a chilling 

effect on people engaging in that activity and certain chill venture 

financing for a technology developer. 

Mr. O’LEARY. Again, your question is well taken. I am not quarreling with your point. 

One thing I will say is there has been this notion that has been 

bandied about that people are going to be arrested. Most of these 

cases will not result in an arrest. It will be handled in a different 

way. 

But having said that, I think the important thing is within the 

criminal statutes, within the criminal code that we have now, there 

are safeguards built in. Ms. Pallante talked about them. They are 

the elements of the crime, their willfulness. If you have a legitimate business that is truly involved in a legitimate dispute with 

another legitimate business, as a first principle that is going to 

send up a red flag with 99 percent of the prosecutors, if not all of 

them out there. 

The second part of it is—let’s take the YouTube example that you 

mentioned. YouTube does a number of things. And I am speaking 

60 

generally, not in regard to any specific case, and I am not speaking 

to the case they are involved in. But they do a number of things 

that go directly to the state of mind of that organization. For example, they are not members of the UGC principles but they adhere 

with them, which basically is a process whereby if they are notified 

that something infringing is there, they take it down. They utilize 

filters. They utilize notice and takedown. These are all steps that 

go to their state of mind. 

I suppose it is possible that there is a hypothetical that you could 

somehow ignore all of those facts and say that they are willfully 

violating a known legal duty and somehow engaging in some type 

of commercial-scale infringement. I just think it is very unlikely, 

and I think that that risk exists for them right now, to the extent 

it exists at all, under reproduction and distribution. That is my 

only point. I don’t know that there is anything new going on here 

frankly. I think this is just a variation on the same theme that has 

been in place for decades. 

Ms. LOFGREN. Could I do just a quick follow-up on that, Mr. 

Chairman? 

Mr. GOODLATTE. Sure. 

Ms. LOFGREN. YouTube—I mean, they have evolved. I mean, 

there was a time when they didn’t do those things. Now they are 

doing all kinds of things, filtering and the like. 

Facebook doesn’t do any of that. I don’t know, but I assume there 

is a lot of infringing material on people’s Facebook websites. But 

they don’t do filtering. Twitter does a lot of notice and takedown. 

I don’t know how that has really worked with Facebook. 

I just think when the next Facebook comes along, you don’t want 

to deter that innovation by chilling the whole tech development environment. By their state of mind, they are not doing any of the 

things that YouTube is doing now, and so what would their intent 

be? 

Mr. O’LEARY. I don’t disagree with anything you just said. I don’t 

want to deter the next Facebook. I would like them to play by the 

rules, though. That is my point. 

Mr. GOODLATTE. I thank the panel and the witnesses because 

this has been a great discussion and very helpful as we craft this 

component of legislation that will be forthcoming. 

Without objection, all Members will have 5 legislative days to 

submit to the Chair additional written questions for the witnesses 

which we will forward and ask the witnesses to respond as promptly as they can so that their answers can be made a part of the 

record. 

Without objection, all Members will have 5 legislative days to 

submit any additional materials for inclusion in the record. 

And with that, I again thank our witnesses and congratulate our 

new Register of Copyrights and declare the hearing adjourned. 

[Whereupon, at 4:22 p.m., the Subcommittee was adjourned.] 

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