U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001

64–856 PDF 2011

OFFICE OF THE U.S. INTELLECTUAL PROPERTY 

ENFORCEMENT COORDINATOR 

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 

MARCH 1, 2011 

Serial No. 112–33 

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 

TOM REED, New York 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

DENNIS ROSS, Florida 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

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 

HOWARD COBLE, North Carolina, Vice-Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

MIKE PENCE, Indiana 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM REED, New York 

TIM GRIFFIN, Arkansas 

TOM MARINO, Pennsylvania 

SANDY ADAMS, Florida 

BEN QUAYLE, Arizona 

MELVIN L. WATT, North Carolina 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

JUDY CHU, California 

TED DEUTCH, Florida 

LINDA T. SA ́ NCHEZ, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

BLAINE MERRITT, Chief Counsel 

STEPHANIE MOORE, Minority Counsel 

(III) 

C O N T E N T S 

MARCH 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 ............................................................ 3 

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 ................................................................................................................. 4 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Member, Subcommittee on Intellectual Property, 

Competition, and the Internet ............................................................................ 4 

WITNESSES 

The Honorable Victoria A. Espinel, U.S. Intellectual Property Enforcement 

Coordinator, Executive Office of the President 

Oral Testimony ..................................................................................................... 5 

Prepared Statement ............................................................................................. 8 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable Howard L. Berman, a Representative 

in Congress from the State of California, and Member, Subcommittee on 

Intellectual Property, Competition, and the Internet ....................................... 26 

Material submitted by the Honorable Debbie Wasserman Schultz, a Representative in Congress from the State of Florida, and Member, Subcommittee on Intellectual Property, Competition, and the Internet ............... 46 

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Tom Reed, a Representative in Congress from the State of New York, and Member, Subcommittee on Intellectual Property, Competition, and the Internet .................................................... 56 

Response to Post-Hearing Questions from the Honorable Victoria A. Espinel, 

U.S. Intellectual Property Enforcement Coordinator, Executive Office of 

the President ........................................................................................................ 57 

Prepared Statement of the U.S. Chamber of Commerce ...................................... 67 

(1) 

OFFICE OF THE U.S. INTELLECTUAL 

PROPERTY ENFORCEMENT COORDINATOR 

TUESDAY, MARCH 1, 2011 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMPETITION, AND THE INTERNET, COMMITTEE ON THE JUDICIARY, Washington, DC. 

The Subcommittee met, pursuant to notice, at 1:33 p.m., in room 

2141, Rayburn Office Building, the Honorable Bob Goodlatte 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Goodlatte, Coble, Chabot, Issa, Pence, 

Jordan, Chaffetz, Reed, Griffin, Marino, Adams, Quayle, Watt, Conyers, Berman, Chu, Deutch, Sa ́nchez, Wasserman Schultz, Lofgren, 

and Jackson Lee. 

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

Clerk; and Stephanie Moore, Minority Counsel. 

Mr. GOODLATTE. This hearing of the Subcommittee on Intellectual Property, Competition, and the Internet will come to order. 

And I will recognize myself for an opening statement. 

Companies that rely upon strong intellectual property protection 

employ 18 million Americans, account for more than 50 percent of 

our exports, contribute 40 percent of our economic growth, and 6 

percent of our gross domestic product. 

Given these numbers, it is apparent that our continued ability to 

promote creativity and innovation and protect American intellectual property lie at the center of vital U.S. economic and national 

security interests. 

But how serious are the challenges to U.S. IP leadership? What 

should be our priorities, and what are the appropriate roles of the 

public and private sectors in preserving our competitive advantages 

and protecting intellectual property? 

I would like to note the intelligence community’s analysis of one 

of the evolving threats posed by IP theft. Earlier this month, the 

Director of National Intelligence stated that in our interdependent 

world, economic challenges have become paramount and cannot be 

underestimated, from increasing debt to fluctuating growth, to China’s economic and military rise. He went on to say we are seeing 

a rise in intellectual property theft. Industry has estimated the loss 

of intellectual property worldwide to cyber crime in 2008 alone cost 

businesses approximately $1 trillion. 

We believe this trend has gotten worse. Last year, some of our 

largest information technology companies discovered that throughVerDate Aug 31 2005 09:44 Jul 05, 2011 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6601 H:\WORK\IP\030111\64856.000 HJUD1 PsN: 64856
2 

out much of 2009, they had been the targets of systematic efforts 

to penetrate their networks and acquire proprietary data. The intrusions attempted to gain access to repositories of source code, the 

underlying software that comprises the intellectual crown jewels of 

many of these companies. 

Similar findings were included in the intelligence community’s 

2011 Annual Threat Assessment. It is clear that the challenges 

faced by IP holders are serious and that protecting intellectual 

property has important implications for our Nation’s economy innovation and national security. 

The U.S. Government clearly has both strategic and practical interests in ensuring our Nation’s IP laws foster the continued development of innovative and creative products here at home. We also 

have obligations to ensure our laws are administered efficiently 

and enforced appropriately. 

In recognition of the need to elevate IP enforcement policy on the 

permanent list of U.S. Government priorities, Congress passed the 

Prioritizing Resources and Organization for Intellectual Property 

Act of 2008, or PRO-IP, signed into law by President George W. 

Bush on October 13, 2008. The effort to enact PRO-IP was led by 

our then Chairman and current Chairman and current Ranking 

Member, Representative John Conyers, Jr., and Representative 

Lamar Smith, respectively. The law followed unprecedented efforts 

by the Bush administration to implement new strategies to assist 

IP owners and improve IP enforcement at home and abroad. These 

included the Strategy Targeting Organized Piracy, or STOP, and 

the formation of the Department of Justice’s first intellectual property task force. 

A key provision of PRO-IP is the requirement to establish the intellectual property enforcement coordinator position, or IPEC, in 

the Executive Office of the President. Congress determined this 

was needed to make certain the official charge with coordinating IP 

enforcement policy across all agencies had the requisite authority 

and independence to transcend agency boundaries. 

In September of 2009, President Barack Obama nominated Victoria Espinel, the former Assistant U.S. Trade Representative for 

Intellectual Property and Innovation, as the first IPEC. She was 

confirmed in December of 2009. Since assuming office, Ms. Espinel 

has been responsible for fulfilling the statutory duties specified in 

section 301(b) of the PRO-IP. 

In June of 2010, the Office of the IPEC published the inaugural 

Joint Strategic Plan on Intellectual Property Enforcement which 

identified 33 enforcement strategy action items the Federal Government will take to enhance the protection of American intellectual property rights. Several are of specific interest to the Subcommittee. These include efforts to combat the theft of intellectual 

property online and increase information sharing between law enforcement officials and rights holders. 

In February, the office published its first annual report on IP enforcement, and the President appointed the IPEC to chair two new 

IP enforcement advisory committees. In addition, the office reports 

substantial progress on developing a white paper that will contain 

specific statutory recommendations for improving Federal intellectual property laws and enforcement efforts. 

3 

I am told one or two issues need to be finalized, but I am hopeful 

the Members of the Subcommittee may receive a brief overview of 

what is expected. 

As you can see, we have a lot to talk about today, especially at 

a time when this Subcommittee is about to undertake hearings examining the ever-growing problem of online piracy and rogue 

websites both here in the U.S. and overseas. Ms. Espinel has assumed her duties at a historic and critical time. Today’s hearing, 

which represents the first formal oversight hearing of the office for 

the IPEC, will examine the work of the office since it was established in 2008. I look forward to hearing about the progress of the 

office, as well as new ideas that office has for further protecting the 

intellectual property rights of America’s authors and creators. 

Now, I think we still have time before we need to depart for 

votes, and if the gentleman is willing, I will recognize the Ranking 

Member of the Subcommittee, the gentleman from North Carolina, 

Mr. Watt. 

Mr. WATT. Thank you, Mr. Chairman, for convening this important hearing. 

The Prioritizing Resources and Organization for Intellectual 

Property Act, better known as PRO-IP Act, was introduced by then 

Chairman Conyers and Ranking Member Smith in 2007. Chairman 

Goodlatte and I also co-sponsored the bill which was signed into 

law October 13, 2008. 

The PRO-IP Act followed countless studies that demonstrated 

the reliance of U.S. businesses and entrepreneurs on intellectual 

property rights to protect their investments, resources, and creativity that in turn feed and grow the U.S. economy. Patents, 

trademarks, and copyrights are the backbone of many American 

enterprises and virtually all innovation. However, we found that 

increasing theft, both within and beyond the U.S. borders, cost 

American jobs and often also threatens public health and safety. 

We also recognized that there were major challenges in coordinating Federal enforcement of existing laws in support of intellectual property rights. Numerous agencies shared responsibility for 

interdiction, investigation, and prosecution of intellectual property 

offenses. To address this disjointed system of enforcement, the 

PRO-IP Act created the position of the Intellectual Property Enforcement Coordinator and required that it be housed in the Executive Office of the President. 

Today we welcome Victoria Espinel, the Intellectual Property Enforcement Coordinator to this inaugural oversight hearing of IPEC 

in the House to tell us what progress has been made since her position was created. This will be our first opportunity, since the President’s State of the Union and subsequent issuance of the executive 

order designating the strengthened Federal efforts to encourage innovation through vigorous enforcement of our intellectual property 

laws, to hear an Administration official on the implementation of 

concrete steps to ramp up our IP enforcement regime. So I look forward to hearing from our witness and yield back the balance of my 

time. 

Mr. GOODLATTE. I thank the gentleman. 

It is my understanding that the Ranking Member of the full 

Committee, the gentleman from Michigan, Mr. Conyers, also has a 

4 

statement. And I think maybe we can get that in before we depart 

for votes. Does the gentleman wish to be recognized now or when 

we return? 

Mr. CONYERS. I would prefer when we come back, Mr. Chairman. 

Mr. GOODLATTE. Okay. Well, with that in mind, then I think the 

Committee will stand in recess and when we return, we will start 

with Mr. Conyers or Mr. Smith, if he is here. And then we will 

turn to you, Ms. Espinel. Thank you for your patience. 

[Recess.] 

Mr. GOODLATTE. The Committee will come to order, and the 

Chair now recognizes the gentleman from Michigan, Mr. Conyers. 

Mr. CONYERS. Thank you, Chairman Goodlatte. 

The only thing I wanted to add in welcoming our witness is to, 

first of all, concur with the comments that I have heard from 

Chairman Goodlatte and Ranking Member Watt, is the following. 

This no doubt talented and charming member raises the question 

for me of is she tough enough for this job. That remains to be seen, 

and perhaps I can become convinced of it this afternoon. 

There is something else that I would add and then put my statement in the record. 

There are several other things that I would like to see happen. 

First of all, I would think that this office requires at least 10 fulltime staff people, not detailees. 

And further, I feel that the office of IPEC should be moved to the 

Office of Science and Technology Policy instead of where it is. 

Finally, I commend the President for the executive order issued 

several weeks ago, and I think it is an excellent step toward combating intellectual property theft in our country and abroad. But I 

think this has to be seriously addressed and not just have an office 

in an organizational chart, and that is where I hope this Committee can be effective in making this a genuine operation. 

And I welcome the witness and I yield back my time. 

Mr. GOODLATTE. I thank the gentleman. 

And it is now my pleasure to recognize the Vice-Chairman of the 

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

Mr. COBLE. Thank you, Mr. Goodlatte. I will be very brief. 

Thank you and the Ranking Member for having scheduled this 

very important issue involving a very important issue. 

And it is good to have you, Ms. Espinel, with us today. 

Thank you, Mr. Chairman. I yield back. 

Mr. GOODLATTE. I thank the gentleman. 

We have a very distinguished and I think pretty tough, too, witness today. Your written statement will be entered into the record 

in its entirety, and we would ask you to summarize your testimony. 

To help you stay within the 5-minute time limit, 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, it signals your 5 minutes have expired, but you are going 

to have loads of questions to get any points you didn’t make in your 

opening statement into the record. 

It is our custom on this Subcommittee to swear in our witnesses. 

So before I introduce you, I would ask that you stand and be sworn 

in. 

[Witness sworn.] 

5 

Mr. GOODLATTE. Thank you. 

Our witness is Victoria A. Espinel, the U.S. Intellectual Property 

Enforcement Coordinator for IPEC. Ms. Espinel is the first person 

to serve in this important position which Congress, through enacting the Prioritizing Resources and Organizing for Intellectual Property Act, or PRO-IP Act, required to be created in the Executive Office of the President. 

Ms. Espinel is well known to the Members of this Committee 

through her several appearances and earlier service as the firstever Assistant United States Trade Representative for Intellectual 

Property and Innovation in the Office of the U.S. Trade Representative. In that capacity, she served as the principal U.S. trade negotiator on IP and chaired the interagency committee that conducts 

the annual special 301 review of international protection of IP 

rights. 

Before confirmation as the IPEC, Ms. Espinel was a visiting professor at the George Mason University School of Law. She holds an 

L.L.M. from the London School of Economics, a J.D. from Georgetown University, and a bachelor of science in foreign service from 

Georgetown University School of Foreign Service. 

We welcome her return to the House Judiciary Committee where 

in 2005 she first testified before Congress and look forward to receiving her testimony at the first oversight hearing that is devoted 

to the Office of the U.S. Intellectual Property Enforcement Coordinator. Ms. Espinel, welcome. 

TESTIMONY OF THE HONORABLE VICTORIA A. ESPINEL, U.S. 

INTELLECTUAL PROPERTY ENFORCEMENT COORDINATOR, 

EXECUTIVE OFFICE OF THE PRESIDENT 

Ms. ESPINEL. Thank you very much. 

Chairman Goodlatte, Ranking Member Watt, Members of the 

Subcommittee, thank you for your continued leadership on intellectual property. 

As President Obama said in the State of the Union Address: ‘‘In 

America, innovation doesn’t just change our lives. It is how we 

make a living.’’ Protecting creativity and innovation and the jobs, 

exports, and economic growth that they create is what I do every 

day. It takes effective enforcement to ensure that a revolutionary 

idea can blossom into economic opportunity and create the highpaying jobs that will drive our prosperity in the future. 

The PRO-IP Act of 2008 created my position, the Intellectual 

Property Enforcement Coordinator, and placed it within the Executive Office of the President. Members of this Subcommittee were 

instrumental in creating my position, and I am honored to serve as 

the first coordinator. 

To show the importance the President places on intellectual 

property enforcement, 3 weeks ago he issued an executive order establishing a cabinet-level committee, which I will chair, to further 

focus the Administration’s IP protection efforts. 

My first order of business upon taking office was to coordinate 

the development of the Administration’s Joint Strategic Plan. That 

strategy, which we issued in June, resulted from significant public 

input and the coordinated efforts of the Federal agencies. I want 

6 

to highlight some of the concrete steps we have taken to improve 

enforcement in the 8 months since we issued the strategy. 

First, we will lead by example and ensure we respect intellectual 

property in our policies and practices. In January, we issued a 

statement setting out the Administration’s policy to be technology 

neutral in our procurement and that all technology must be properly licensed. We are also reviewing our policies on the use of software by Federal contractors. 

Counterfeit products that could harm our military or our national security are unacceptable. We are working intensely with 

DOD and NASA and others on a plan to stop counterfeit products 

from entering the military and critical infrastructure supply chain 

and will issue recommendations later this year. I look forward to 

working with you on this important issue. 

Second, we will be transparent so the public knows what we are 

doing and can have input. My office has met and will continue to 

meet with stakeholders as we implement the strategy. 

Third, we will we will improve our coordination. We now have 30 

law enforcement teams in cities across the Nation working with 

State and local law enforcement. We have identified 17 countries 

where enforcement is a priority and the embassies there have 

formed working groups and are drafting concrete action plans to 

address the challenges in those countries. 

Fourth, we will enforce our rights overseas. In November, USTR 

concluded negotiations on an enforcement agreement called ACTA 

with 38 countries representing over half of global trade. Since 

June, the U.S. has led and participated in three global law enforcement sweeps against counterfeit drugs and online piracy, each involving over 30 countries. We are working with the agencies and 

industry to assess China’s progress under the enforcement campaign announced in October and to encourage more action. And 

USTR just yesterday issued a report on physical and online overseas markets that will raise awareness and aid our diplomatic efforts. 

Fifth, we will secure our supply chain. That includes working to 

minimize infringing products coming into the United States and 

technology being illegally transferred out of the United States. 

Overall, intellectual property enforcement is up. From 2009 to 

2010, ICE investigations opened are up more than 41 percent. DHS 

seizures are up more than 34 percent, and FBI investigations 

opened are up more than 44 percent. 

In June and July, ICE and DOJ had two of the largest counterfeit goods cases in history, each involving over $100 million worth 

of counterfeit goods. 

DOJ and the FBI have made trade secret cases a priority, including two recent cases involving the theft of technology developed by 

our automobile industry, one of which involve hybrid car technology. 

Securing our supply chain also means fighting infringement in 

the digital world. To do so, we need increased law enforcement, voluntary action from the private sector, and consumer education. 

DOJ and ICE have launched ‘‘Operation In Our Sites,’’ targeting 

websites used to distribute infringing products. We are also working with the private sector to encourage voluntary actions that are 

7 

practical and effective, respect privacy and fair process, and protect 

legitimate uses of the Internet. 

In December, we announced that a number of major Internet 

intermediaries agreed to come together as leaders to form a nonprofit to take voluntary enforcement actions against illegal online 

pharmacies. By preventing criminals from gaining access to consumers and appearing legitimate through the use of payment processors, the purchase of ads or a registered domain name, these 

companies can play a critical role in combating illegal online pharmacies. 

Voluntary cooperative solutions are a priority focus for our office, 

and we believe, in combination with increased law enforcement, 

voluntary actions by the private sector have the potential to dramatically reduce online infringement and change the enforcement 

paradigm. We will continue to push forward with voluntary actions 

on multiple fronts. 

Finally, we will build a data-driven Government to ensure our 

policies are as well informed as possible. We are working with leading economists in the Administration on the first-ever U.S. Government economic analysis that will measure the jobs and exports created by IP industries across our entire economy. 

We are committed to help American businesses, to protect American jobs, to increase exports, to protect health and safety, and to 

ensure that innovation continues to drive our economic growth. We 

know we still have much to do, and we will continue working. 

Later today, we will deliver to you a strategy to fight counterfeit 

drugs, and in the near future, we will provide to you a white paper 

of legislative recommendations. 

I commend the Subcommittee’s leadership and I look forward to 

working closely with you. 

[The prepared statement of Ms. Espinel follows:] 

8 


Espinel-1.eps
9 


Espinel-2.eps
10 


Espinel-3.eps
11 


Espinel-4.eps
12 


Espinel-5.eps
13 


Espinel-6.eps
14 

Mr. GOODLATTE. Thank you, Ms. Espinel. 

I will start the questioning. 

I mentioned in my opening remarks your work on preparing legislative recommendations for enhancing IP protections. When 

might we expect to receive those recommendations? 

Ms. ESPINEL. I hope to have those recommendations to you very 

soon. I think we are very close to completion. It is a comprehensive 


Espinel-7.eps
15 

set of legislative recommendations and so it has gone through an 

intense interagency process which is not yet completed, but hopefully will be very soon. And we will have those recommendations 

to you as quickly as it is completed. 

Mr. GOODLATTE. Thank you. We will look forward to examining 

those. 

This Committee observed that a gap in the criminal law discourages Federal prosecutors from pursuing cases of unauthorized 

streaming of television programming over the Internet. In fact, we 

conducted a hearing on related issues just over a year ago. 

What are your thoughts on whether Congress should close this 

loophole by providing felony penalties in appropriate circumstances? 

Ms. ESPINEL. We have heard this concern about a deficiency in 

our law related to illegal streaming. We have heard it from the industry. We have heard it from law enforcement. It is something 

that we are seriously considering in the context of the white paper 

on legislative recommendations that I mentioned. As I said, I hope 

to have that to you very soon. But I think I am safe in saying that 

this is an issue of great concern to us. I think it is critical to helping us fight the problem of online piracy, and I hope that we have 

a recommendation to you on that very soon. 

Mr. GOODLATTE. Thank you. 

Increasingly we hear that counterfeiting and piracy represent a 

national security threat. Do you agree with that, and in what respects does piracy affect our national security? 

Ms. ESPINEL. I do agree with that, and I am going to answer that 

in two different ways: one, to tell you about an initiative that we 

are already working on; and two, to tell you about an initiative 

that we are just starting. I think I will start with the latter. 

There is a number of conversations that we are having with the 

FBI, with NSF, with certain companies that have made clear to us 

that there is a threat to our national security from counterfeit 

products or from other types of IP infringement like trade secrets 

being transferred overseas. So one of the things that my office is 

working on right now is trying to assess exactly what the scope of 

the problem that we are facing is and then what we need to do as 

a Government to address it. 

There is one area of this where we have already identified a 

threat, and we are working intensely with DOD and NASA on how 

to address that. So we have identified a problem with counterfeit 

products coming into the military supply chain. That is, as I said, 

completely unacceptable. We are working very intensely with DOD, 

NASA, and some of the other agencies on a plan to address that. 

We are also working with DOJ and the FBI which have made this 

a priority issue for them in terms of law enforcement. 

There are a number of legislative recommendations that we are 

considering in this area, which I hope to have to you shortly. And 

in terms of the overall U.S. Government procurement supply chain, 

we are working on recommendations that I am confident that we 

will have to you within the year, if not sooner. 

Mr. GOODLATTE. In the plan that you set out last year, you proposed to update the executive order requiring Federal agencies to 

use legal software, to also require those doing business with the 

16 

Government to do so as well. Your report said in part, quote, to 

demonstrate the importance we place on the use of legal software 

and to set an example to our trading partners, the U.S. Government will review its practices and policies to promote the use of 

only legal software by contractors. 

This is a great idea. What is the status of this new executive 

order? 

Ms. ESPINEL. Well, we think it is enormously important that 

those who are doing business with the U.S. Government respect intellectual property. We are also keenly aware that what the United 

States does, in terms of our own policies and practices and in terms 

of the contractors that work with us, can serve as an example to 

other countries around the world. So this is an issue that we care 

about deeply, and I hope that we are soon in a position that we 

can report back to you on the steps that we are planning to take. 

But it is very good for me to know that you and this Committee 

are interested in that issue, and I will certainly convey that back 

to the interagency process we have where we are discussing this. 

Mr. GOODLATTE. We definitely are interested. So, in other words, 

an executive order has not yet been fashioned for the President to 

issue. 

Ms. ESPINEL. There had been discussion of a number of options 

and updating the executive order is clearly—I think, obviously, one 

of the options that we have discussed, but there has been no decision yet as to what the President might do. 

Mr. GOODLATTE. Administrations from both sides of the aisle and 

law enforcement agencies have routinely announced their intention 

to dedicate new resources to IP enforcement, investigations, and 

prosecutions. But what is meant by ‘‘dedicated’’ or ‘‘devoted’’ resources seems to be amorphous. Have you provided any guidance 

to agencies to ensure that such announcements are benchmarked 

and based on consistent criteria? If not, do you think this might be 

a worthwhile pursuit? We hear a lot of people talking about setting 

priorities, but then we do not see a lot behind that. 

Ms. ESPINEL. Well, hopefully you will see a lot behind that in 

terms of our office. We have talked to a number of the agencies, 

particularly the law enforcement agencies, about dedicated IP personnel. I think it has been very clear in the conversations that we 

have had with the agencies that when we say dedicated IP personnel, we mean personnel that are spending virtually all of their 

time on intellectual property, that that is in fact what they are 

dedicated to full-time. 

I can tell you that ICE, the Immigration and Customs Enforcement, is looking at increasing the number of dedicated IP personnel that they have. In fact, in September, they put in place 

their first sort of full-time IP personnel in China. I know that the 

FBI is also seriously considering putting a dedicated IP agent in 

Beijing, which we think would be enormously helpful. 

Beyond that, we have also been working with DOJ on putting 

more overseas personnel in place. Now, I think in the case of DOJ, 

it would likely be personnel that had multiple responsibilities, but 

those personnel would be hired with an IP background and a significant amount of their responsibilities would be devoted to intellectual property. 

17 

In terms of benchmarks, one of the things that we did last year 

was, for the first time, actually canvass the agencies to find out exactly what they were spending on IP enforcement and where those 

resources were being spent. That is something that we are planning to do again this year. So I would be happy to report back to 

you on the data that we collect at the end of that process. 

Mr. GOODLATTE. Thank you very much. 

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

Mr. WATT. Thank you, Mr. Chairman. 

And welcome, Ms. Espinel. 

Ms. ESPINEL. Espinel. 

Mr. WATT. Great to have you here. 

In December, your office announced the formation of a private 

sector nonprofit involving a number of players to try to counteract 

the sale of counterfeit pharmaceuticals. There are a number of 

other segments other than counterfeit pharmaceuticals, obviously, 

where the issue of piracy and copyright and other counterfeits are 

taking place. 

I am wondering whether you see a different set of issues related 

to the pharmaceutical industry and the sale of pharmaceuticals as 

opposed to some of these other things and whether you are contemplating doing something similar in other segments. And I am also 

wondering how this plan has progressed to this point. So if you can 

kind of address both of those at the same time, it would be great. 

Ms. ESPINEL. I would be happy to. 

The counterfeit pharmaceuticals raise health and safety issues 

that also, frankly, are raised by other types of counterfeited products, although not all types of counterfeited products. So that is, I 

suppose, a difference with counterfeit pharmaceuticals. 

That said, my office is committed, as we have said many times, 

to try to reduce infringement across all of our business sectors, and 

it is an amazingly wide array of business sectors that have come 

to us to say that they are suffering from infringement. 

In terms of online enforcement, we feel that the types of voluntary actions that the private sector said that they would take in 

the context of illegal online pharmacies could also be very helpful 

in trying to reduce other types of online infringement. So we are 

actively engaged in discussions with a number of types of intermediaries, including the payment processors or credit card companies, for example, with domain name registrars, with Internet service providers, with ad brokers or the companies that provide for advertising over the Internet. 

I think one of the areas that is a priority focus for us is trying 

to make sure that people are not using infringement as a way of 

making money and try to cut this off as a money-making venture. 

So one of the things that my office is very focused on is trying to 

go after the sources of money, and we feel that working with Internet intermediaries is one of the ways that we can help try to effectively cut this off as a business. 

Mr. WATT. Have you made any progress since December when 

you formed this nonprofit? 

Ms. ESPINEL. We haven’t made any progress—— 

Mr. WATT. Any measurable progress. 

18 

Ms. ESPINEL [continuing]. That I am in a position to announce. 

I think we have had some discussions that are going well, but 

clearly—or at least as I have tried to make clear—we need to see 

more action by the private sector. While we have had some discussions that seem to be moving in the right direction, I think we need 

for those to be concluded in a positive manner. And again, this is 

a very important focus for us, so we will continue to push forward 

on it. And it is good for me to know that you are also interested 

in it. 

Mr. WATT. How many permanent staffers does your office have? 

And compare that with what you believe you need, if you would. 

Ms. ESPINEL. So my office has me and James Schuelke, my confidential assistant who is fabulous. Other than me and James, the 

office is staffed with a number, a few, temporary details who have 

been fantastic, very hard-working, very dedicated to the mission, 

but they are on loan to me from other agencies. 

In terms of resources that we need, I think in this fiscal environment, obviously, everyone is trying to make do with what they 

have and to get as much out of their resources and to use those 

resources as effectively as they possibly can. We will continue to do 

that. 

I should also note that we have had great support from the agencies, and so that has been an enormous advantage and help that 

my office has had in terms of level of commitment and support that 

we have had from the agencies. We will continue to assess our resources as we move forward. 

Mr. WATT. So I assume there are some advantages to having 

detailees from other agencies, but when you get people detailed 

from an agency like the Patent and Trademark Office and they 

have a substantial backlog, it raises questions about the effective 

use of people. Can you tell us what the advantages are of having 

detailees and address the concern that that might raise about 

whether some of these other places need the employees also? 

Ms. ESPINEL. I am tempted to kick that question to my detail 

from the Patent and Trademark Office. 

I will just say that David Campos has been very generous in giving the office support and sending details to the office because I 

know he has a big job on his hands and likely feels that he could 

use all of his staff. Tom Stoll, who has been in the office for about 

a year now, but is unfortunately leaving soon to go back to the 

PTO, has been an enormous asset. PTO is sending over a detail to 

replace him, and I am confident that—— 

Mr. WATT. How is that efficient? 

Ms. ESPINEL [continuing]. The detail will also be an asset. 

Mr. WATT. I mean, it just seems like that would be inefficient to 

keep this revolving door detailee situation going. 

Ms. ESPINEL. Well, I think we have accomplished a lot under the 

circumstances that we face. 

Mr. WATT. I understand that but we are trying to make this operation more and more efficient too. And unless there is some real 

advantage to turning the people, the detailees, I mean, I don’t 

know what we are gaining from that, which is why I asked the 

question. I was trying to see if there were some advantages to temporary detailees, but you haven’t addressed that one. 

19 

Ms. ESPINEL. I think the details that have come to the office 

have been great, and I think the backgrounds that they have had— 

some of them have had IP backgrounds. Some of them, frankly, 

haven’t. But they have all done a tremendous job of getting up to 

speed with the challenges of the office and the issues that we are 

facing and have been very, very loyal to the office and to the mission and I have to say incredibly hard-working. I suspect that some 

of them are eagerly anticipating returning to their home agencies 

and not—— 

Mr. WATT. That is all right. Obviously, you are not going to answer that question. [Laughter.]So I will just yield back. My time 

has expired. 

Ms. ESPINEL. I just need time to compliment the details. 

Mr. WATT. I know they have done a great job, but—okay. All 

right. I will let it go. 

Mr. GOODLATTE. I thank the gentleman. 

I now yield to the other gentleman from North Carolina, the Vice 

Chairman of the Subcommittee, Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman, our neighbor to the north. 

Thank you, Mr. Goodlatte. 

Ms. Espinel, good to have you with us. 

A key mission of the U.S. Customs and Border Patrol is to target 

and seize imports of counterfeited and pirated goods. From 2005 

through 2008, there was a steady and dramatic increase in both 

the number and yearly domestic value of seizures, with the latter 

rising from $93 million to $273 million. In 2009, however, there 

was a drop in the number of seizures and a 4 percent decline in 

the yearly domestic value of seized goods, which you probably 

know. 

Are you concerned about these declines and what do you think 

accounts for them? What steps should or should have been taken 

to get the Customs and Border Patrol back on the upward swing? 

Ms. ESPINEL. Thank you. So the value of imports did fall 4 percent in the year that you mentioned, although the value of imports 

overall in that year declined by 25 percent because of the economy. 

Mr. COBLE. What year was this? 

Ms. ESPINEL. From fiscal year 2008 to fiscal year 2009. So the 

proportional change in the value of IP was actually much less, 

which I think indicates the priority that was put on intellectual 

property seizures. 

There have been declines in value also, though, from 2009 to 

2010, even though the number of seizures has gone up. And I think 

in that case, the decline in value can be attributed to a change in 

counterfeiter tactics. 

So just to explain that, two of the things the counterfeiters are 

doing right now is they are splitting up counterfeit goods and they 

are shipping them into the United States in smaller packages. So 

that means the individual value of seizures can fall. And they are 

doing this, obviously, to try to evade Customs and make it even 

harder for Customs to seize things. 

Another thing that is happening and is happening increasingly 

is that counterfeiters are essentially selling direct to consumers. So 

instead of shipping large pallets through Customs that then go to 

middlemen, they are shipping small packages that go direct to conVerDate Aug 31 2005 09:44 Jul 05, 2011 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6601 H:\WORK\IP\030111\64856.000 HJUD1 PsN: 64856
20 

sumers. This is a big challenge that our Customs is facing, and not 

just U.S. Customs. This is a challenge European customs, for example, is facing as well. 

So one of the things that we have been doing is working with 

Customs to see what they need in terms of technology or law enforcement tools, including legislative changes to help them address 

this particular problem. 

The one other thing, though, I would mention is that if you look 

at this past year, seizures are up. In terms of the number of seizures, seizures are up 34 percent, and I would highlight that in 

terms of sort of critical areas that we are focusing on like health 

and safety and technology, seizures are up 97 percent. 

Mr. COBLE. Thank you. 

This Committee generally, and this Subcommittee specifically, 

has been a strong advocate for the need to improve the enforcement of intellectual property rights. Indeed, the original PRO-IP 

bill that led to the creation of your position, in fact, and required 

it to be placed within the Executive Office of the President was introduced by our former Chairman, Mr. Conyers, and our present 

Chairman, Mr. Smith. Over time, the need to ensure that IP rights 

are respected and enforced is only going to increase in my opinion, 

as is the need to ensure our agencies are working efficiently and 

effectively. 

Let me put this question to you, Ms. Espinel. In your opinion, 

what is the single most important thing that we Members who care 

about strong IP rights can do to ensure your office is provided with 

the resources, certainty, and permanence needed to accomplish 

what we need to do for American creators and innovators? 

Ms. ESPINEL. Well, I would highlight two things, if that is acceptable. 

First, I would say in terms of our overall enforcement efforts, 

while enforcement has increased over this past year and I can assure you will continue to increase, I think are areas where our law 

enforcement could use more tools. And so one of the things that we 

would really like your help on is working with us on legislative recommendations. And I realize that we owe you the white paper on 

legislative recommendations that we have been preparing, but 

hopefully we will have it to you soon. And then we would very 

much like to work with you as that moves forward. 

And the second thing I would say is I think it is, as I have mentioned, incredibly helpful to us to hear from Members directly what 

their concerns are and to have you highlighting the importance of 

this issue, which is very important to the Administration, but we 

know it is very important to Congress as well. Even though we 

know that, it is always helpful to hear that directly. So hearings 

like this or other ways of highlighting the importance of this issue 

are very helpful. 

Mr. COBLE. Thank you. 

Mr. Chairman, I see my red light has illuminated. So I yield 

back. 

Mr. GOODLATTE. I thank the gentleman. 

And the Chair now recognizes the gentlewoman from California, 

Ms. Lofgren, for 5 minutes. 

21 

Ms. LOFGREN. Thank you, Mr. Chairman, and thanks for this 

hearing. It is helpful to touch base on where we are. 

I note that you have pledged to have transparent policymaking 

and enforcement. And with that in mind, I would like to understand better the recent domain name seizures by ICE, the so-called 

Operation In Our Sites. I want to know how ICE decided which 

websites to target, and I am also interested in knowing whether 

there is an assessment when it is a copyright case of whether there 

are affirmative defenses to alleged infringement, for example, fair 

use, and whether a site is in compliance with the Digital Millennium Copyright Act takedown provisions is considered and whether 

there is a consideration of whether taking down a site will involve 

censorship of material that is protected under the First Amendment. 

For example, in the recent domain name seizures, there were two 

hip-hop blogs called OnSMASH and RapGodFathers. I know that 

from my staff, not from my own understanding of rap music. 

[Laughter.] 

And it is my understanding that the sites had no downloads. 

They hosted no copyright material themselves. They were only 

linked to other sites. In fact, one of the sites claimed—I read this 

in the New York Times—that the labels themselves had asked 

them to link to some of the material because they were an influential fan site, and both sites claimed that they were complying with 

the DMCA takedown provisions. 

Now, I want to know whether you think it is appropriate for ICE 

to seize the domain names of blogs such as this. Is that really a 

priority for enforcement? And do you have concerns about First 

Amendment implications when blogs such as this are seized? 

My understanding is that the top priorities under the act are, 

first, health and safety, links to organized crime, large-scale commercial counterfeiting and online commercial piracy and trade secret thefts or economic espionage. How would this operation fit 

with those priorities and how many—well, I guess that is a lot of 

questions for you to answer. 

Ms. ESPINEL. So, first, let me say I think copyright enforcement, 

online enforcement, Internet piracy is a big issue. It is a big issue 

for our economy, and I think it fits well within the mandate that 

Congress gave me in the PRO-IP Act. 

I think in terms of Operation In Our Sites, as I have said repeatedly, we think increased law enforcement has to be part of what 

we are doing to try to battle rogue websites and the online piracy 

and counterfeiting problem that we face with other actions as well 

by the Administration and by the private sector, but increased law 

enforcement needs to be part of that. 

Operation In Our Sites is based on our seizure authority and has 

the due process protections built into it that will go along with any 

seizures. 

Ms. LOFGREN. Well, there aren’t really any—I mean, they have 

sued the Department and they have had to go to the expense of 

getting lawyers to sue you. But there is no real due process provisions. 

Ms. ESPINEL. Well, actually before any seizure under Operation 

In Our Sites is taken, the agents, working with the prosecutors 

22 

from DOJ, have to go to a magistrate judge to get a showing of 

probable cause before they can take any action against the website. 

And then, as you said, there is also the ability to challenge the seizure after the case. That is the due process that is built into 

our—— 

Ms. LOFGREN. Well, with all due respect, I mean, judges sign a 

lot of things. For example, the FreeDNS takedown. It wasn’t a 

copyright enforcement. It was supposedly a child pornography enforcement. ICE took down 84,000 websites of small business people 

that had nothing to do with child pornography at all and put up 

a little banner saying this was taken down for child pornography, 

really smearing. If I were them, I would sue the Department. 

These were just small businesses. They had nothing to do with 

anything. And yet, a judge signed that. So if that is the protection, 

it is no protection. 

I want to know what is the Department doing to think about the 

affirmative defenses, to think about—yes, there is piracy and all of 

us are united that we ought to do something about piracy. But 

there is also a First Amendment that you should be considering 

when you go and destroy a small business. Are you thinking about 

that? 

Ms. ESPINEL. Yes, we are definitely thinking about that. 

I will go back to your question, but just to say for a moment, I 

think one of the things that the United States—the United States 

as a government—can do very effectively in the space of online enforcement is take an approach—and we have, we believe, a very 

well considered approach—that will serve as an example to other 

countries. We are a government that really cares about due process. We are a government that really cares about the First Amendment, and I think what we do is an example to other countries but 

I think a very positive example. And we do consider all of those 

issues. We will continue to. And that is one of the reasons I think 

it is so important for the United States to be very active in this 

space. 

You mentioned a case, an incident recently related to child pornography. It is not an IP case, obviously, so I am not familiar with 

the details, although I do know that ICE realized that there was 

a problem quickly and moved quickly over the weekend to rectify 

it. I understand, from talking to our law enforcement, that there 

are safeguards in place in Operation In Our Sites to avoid any 

similar type of mistake from happening. 

And I guess I would just emphasize, as you also alluded to, what 

our law enforcement wants to do is go after criminals. That is what 

they do every day. They are incredibly dedicated to that task and 

I think that is where the Administration is as well. 

Ms. LOFGREN. I have a lot of other questions and perhaps—I 

know we have an opportunity to submit them for the record. 

But I will just say in closing that there is a lot of large-scale commercial piracy that is going on, and the Department is doing very 

little about it. I think that that is something that needs attention. 

And some of the people who are into copyright enforcement in Silicon Valley—Mr. Berman, there are many of them—thought that— 

and I can’t say what they said. It was chicken poo in terms of the 

23 

report they saw. They thought it was small time and the big fish 

are getting away. And I think that that needs some attention. 

I will submit my further questions for the record. 

I yield back. 

Mr. GOODLATTE. I thank the gentlewoman. 

The gentleman from Utah, Mr. Chaffetz, is recognized for 5 minutes. 

Mr. CHAFFETZ. Thank you. 

I appreciate you being here. My understanding is part of your responsibility is regarding domestic but also international, and it is 

mostly that international aspect that I would appreciate focusing 

on. 

And Mr. Coble was getting at this, but help me understand the 

metrics behind some of the numbers. You made a big point in your 

written testimony and your verbal testimony about these dramatic 

numbers and the increases that are happening with ICE and the 

seizures and the arrests are up and the Department of Homeland 

Security’s seizures were up. Can you help me quantify what those 

are? I worry sometimes when I hear just percentages. I mean, are 

we going from 12 to 15 or are we going from 12,000 to—help me 

understand when you use these numbers, what actual numbers are 

we talking about, not just percentages. 

Ms. ESPINEL. I know, with respect to the DHS seizures, for example, that are up 34 percent—well, my understanding is that we are 

looking at an increase from 12,000 to about 16,000. I think your 

overall point is are we sort of starting from zero and therefore—— 

Mr. CHAFFETZ. Yes. 

Ms. ESPINEL [continuing]. A dramatic increase is not really an 

indication of that much action. But we are not. IP enforcement has 

been a priority for the U.S. Government for many years. I think we 

are starting from a solid base but trying to increase dramatically 

from that. 

Mr. CHAFFETZ. Can you help me quantify? How much of it do you 

think you are actually getting to? I mean, it is like if we were taking an analogy of people speeding down the freeway and you say, 

well, we have been ticketing more often, but still everybody is 

going 90 miles an hour. What percentage do you think you are actually getting to when you are actually doing these seizures and arrests and all that? How much more is getting by us? 

Ms. ESPINEL. I guess I would say this. One, we recognize that 

even though seizures are up and even though cases are up, there 

is a lot of infringement that we are not catching. 

So let me give you two examples of—— 

Mr. CHAFFETZ. I guess the question is—because my time is so 

short—do you have any metrics that actually quantify the actual 

numbers? And if you do not have them right off the top of your 

head, I understand that. I guess as a written response perhaps as 

a follow-up that is what I would be interested in because I think 

we are all united, both sides of the aisle here, in making sure that 

we do have more enforcement. But it is hard to quantify when you 

use just those percentages. And they seem so dramatic. But I want 

to know much of it are we missing. 

Ms. ESPINEL. I think they are dramatic. We will get back to you 

with the numbers behind the percentage increases. 

24 

I would, though, like to mention that in terms of—I mean, one 

of the things that we are very conscious of is law enforcement. By 

law enforcement, I mean DOJ and FBI and Customs, and the agencies where you are seeing those law enforcement statistics go up, 

that in many areas, including in the online enforcement area, it is 

not possible for law enforcement to, by itself, be able to deal with 

the scale of the problem that we are facing. And so that is one of 

the reasons that my office has been so focused on and why I have 

mentioned repeatedly in this hearing that we really need to have 

the private sector. We really need to have Internet intermediaries 

working cooperatively with us on voluntary solutions because without that, I think it is going to be much more difficult for us to effectively address it. 

Mr. CHAFFETZ. Yes, and there are a lot of distinct—— 

Ms. ESPINEL [continuing]. Go hand in hand. 

Mr. CHAFFETZ. There are a lot of distinct problems and challenges that I have with trying to make sure that these people— 

their being a the law enforcement agency as well. And I am very 

sympathetic to the challenges that that poses upon them when the 

Administration, the law enforcement side, is not doing their job. 

And I hate to put the onus on those individuals. But that is another discussion. 

You mentioned verbally—somebody had put their first IP person 

in China. Do you recall that earlier in your testimony talking about 

how many personnel we actually have? 

Ms. ESPINEL. We have personnel that are overseas in China. 

First of all, I was talking about law enforcement. For example, 

PTO has had people that work on IP enforcement, among other 

things, in China for many years. In terms of law enforcement, we 

of course have law enforcement personnel stationed in China who 

work on a variety of issues, including intellectual property, but in 

terms of having law enforcement that is essentially solely dedicated 

to intellectual property, ICE has a solely dedicated person. They 

made the decision to do that in September. 

Mr. CHAFFETZ. One person. 

Ms. ESPINEL. And the FBI is putting a person in place as well, 

or they are at least seriously considering doing that. 

Mr. CHAFFETZ. And, Chairman, I can see my time is running up. 

But to think that we have one person in China who is solely dedicated to this and now we are going to get two is a 100 percent increase. Wow, look at the great dedication. That is a shockingly 

small number. I walked into this hearing not knowing that number. It is absolutely stunning to me that we have so little focus on 

that. Somehow we have 2.2 million Federal employees and we only 

got two working in China on this issue. I think it is laughable. 

Thank you, Mr. Chairman. I yield back. 

Mr. GOODLATTE. I thank the gentleman. 

The Chair now recognizes the gentleman from California, Mr. 

Berman, for 5 minutes. 

Mr. BERMAN. Thank you very much, Mr. Chairman. 

Good to have you here, Ms. Espinel, again. 

A couple of issues I wanted to try and raise with you. I want to 

deal with sort of the change of distribution of piracy. If one is using 

a search engine and type in the words ‘‘free Beatles mp3’’ or ‘‘free 

25 

King Speech movie,’’ that person will be taken to unauthorized copies of those valuable works. If they type in similar wording in blog 

postings, they may find links to unauthorized copies of works and 

sponsored advertising nearby. You have talked about the work on 

illegal pharmacies and on dealing with searches for kid porn. 

And there was an interesting article recently in the New York 

Times about Google and searches involving J.C. Penney. I would 

like to put that article in the record, if that is all right. I ask unanimous consent to have that article from the New York Times included in the record. 

Mr. GOODLATTE. Without objection. 

[The information referred to follows:] 

26 


64856A-1.eps
27 


64856A-2.eps
28 


64856A-3.eps
29 


64856A-4.eps
30 


64856A-5.eps
31 


64856A-6.eps
32 


64856A-7.eps
33 


64856A-8.eps
34 


64856A-9.eps
35 

Mr. BERMAN. Thank you. 

Basically Google thought J.C. Penney was gaming the search results and took action. The article said one moment J.C. Penney was 

the most visible online destination for living room furniture in the 

country. The next, it was essentially buried. That suggests that 

Google can circumvent organic searches when they want to, for example, as the article suggests, take manual action. The same thing 


64856A-10.eps
36 

with respect to advertising provided next to those unauthorized 

links. 

Given your experience with the illegal pharmacies, doesn’t it 

stand to reason that they could take similar manual action against 

criminal enterprises engaged in IP theft? Have you spoken to any 

of these search engines or advertisers about taking corrective action to prevent IP theft? And can you relay whether Google is attempting to address this problem and how and what next steps will 

be taken? And if you could do that in a way that gives me a minute 

to ask one last question, I would appreciate it. 

Ms. ESPINEL. We are talking to a whole range of Internet intermediaries, including Google, both in their capacity as an advertiser, 

as you mentioned, as well as others that control Internet advertising. And we have raised the issue of search with them, and we 

will continue to do so. So I guess I would just say—— 

Mr. BERMAN. And what do they say? 

Ms. ESPINEL. And I don’t want to speak for Google in terms of 

what they are doing. I think it is fair to say that the companies 

that we have talked to, you know, legitimate companies, don’t want 

bad actors in their systems. Different companies have taken different approaches to how exactly they address that. I feel, in the 

discussions that we are having with a whole range of companies, 

that we are making progress, but I think, frankly, it would be premature for me to tell you at this point how those conversations are 

going to end because they are still in process. 

Mr. BERMAN. Okay. 

On another point, not to respond now, but at some point I would 

like a briefing, if I could get it, from your office on what the Indonesian—sorry— not Indonesia—Singapore. Singapore is promulgating regulations with respect to licensing of television shows that 

are exclusive. I would like to know what we are doing, how those 

regulations would affect the rights of copyright holders to sell their 

product. 

And my last question. In PRO-IP, we have a sense of Congress 

resolution focusing on criminal intellectual property enforcement 

and really the value of a criminal prosecution, both in terms of the 

justice it seeks for the illegal conduct and the people perpetuating 

it, but also for a tremendous deterrent value. There was recently 

an enormous copyright judgment where the defendant who lost the 

judgment, SAP, stipulated to all the facts, which constitute an intentional, willful violation of copyrights on software. This is not for 

your response. This seems like a classic case, but there are probably other ones as well where a criminal enforcement action, where 

the facts are clear and just out there, really has benefits far beyond 

just that particular case but to all those who might be contemplating doing that kind of stuff. And I just think that that sense 

of Congress provision in the PRO-IP Act is worth taking a look at 

and hopefully Justice is doing that because they can play a very 

helpful role here on this. 

And I thank you very much. 

Ms. ESPINEL. Thank you very much. 

Mr. BERMAN. I yield back. 

Mr. GRIFFIN [presiding]. I would like to just yield myself 5 minutes and ask a few questions, Ms. Espinel. 

37 

First and foremost, have you ever visited an overseas military installation? I would assume maybe you have in Afghanistan or Iraq. 

The reason I raise that is you will find, if you go to just about any 

U.S. base or post in Iraq/Afghanistan—you will see a lot of pirated 

materials particularly DVD’s and CD’s but mostly DVD’s, and I 

don’t mean five or six. I mean thousands and thousands. And I was 

just wondering whether—I mean, it was that way when I was in 

Iraq in 2006. I am wondering if you have ever had any sorts of conversations with folks at DOD about that, why we allow that, and 

if there is any conversation about that at all. 

Ms. ESPINEL. Sure, I would be happy to. If I could just—I was 

going to say something in response to your question. So if I could 

just turn to Mr. Berman for a moment—— 

Mr. GRIFFIN. Sure. 

Ms. ESPINEL [continuing]. To say in terms of the sense of Congress and the point you made about even a few criminal actions 

having a deterrent effect that goes far beyond the number of those 

actions, I completely agree with you. 

And I would also say in terms of the level of priority that DOJ 

has put on this issue of IP enforcement, I know that it is a priority 

issue for Attorney General Holder. It is something he is very focused on. He has made that very clear to DOJ and the FBI. So I 

am happy to take back to them concerns about criminal copyright 

enforcement, but I also just want to assure you that I think he personally and his staff take this issue very seriously. 

In terms of the military bases, I have only been on one military 

base installation in the past year. And for whatever reason, the 

problem that you mentioned was not actually in evidence in that 

particular military base, but I believe you that it exists. And in 

fact, we have heard concerns about this before. As I think I mentioned, one of the first sort of overarching principle we had in the 

strategy that we issued for the Administration is that the United 

States needs to protect intellectual property in what we do to serve 

as an example to other governments and to our citizens, and we 

take that very seriously. We have heard this concern and we are 

actually discussing with the Department of State what can be done 

about it. 

Mr. GRIFFIN. And I would point out that there is a distinction to 

be made between, say, a U.S. military base in Germany, for example, where I know of nothing like this going on. I am primarily 

talking about Iraq and Afghanistan where on post you will have a 

PX where you can go in and buy all the legitimate DVD’s, and then 

about 100 yards right down the road there will be a little office— 

I mean, an office or a store where you can just—even if it is a tiny 

storefront with just stacks of what would be illegal DVD’s in the 

United States. If you could take a look at that, I would appreciate 

it. 

I think I have got a little more time here. I would like to ask 

you about Russia. And we hear a lot about China in the context 

of pirated materials, but I would be interested to hear your take 

on Russia and whether, based on your work, you believe—what 

level of respect they have for the rule of law in this area, whether 

we are making any progress with regard to Russia or is it possible 

that we are sort of putting our differences with Russia on these 

38 

issues—maybe we are putting them aside and emphasizing what 

we may consider more important concerns. Could you comment on 

that? 

Ms. ESPINEL. Sure, I would be happy to. 

You know, I think with respect to Russia, clearly IP enforcement 

is a big issue there. You asked whether or not we have made any 

progress. I think Russia has recently passed a few pieces of legislation that I think are significant and are helpful. 

But in terms of enforcement, they still have a big problem. And 

in my experience, in terms of Internet, in particular, they have a 

problem. They have become sort of a safe haven in many cases for 

websites that are distributing illegal products into the United 

States and around the world. So that is a big issue for us. That has 

been a priority focus for the WTO accession negotiations, and we 

have made clear to Russia that we need to make progress there. 

I guess the only other thing that I would mention is that the Vice 

President is going to be traveling in March to Russia. Vice President Biden cares deeply about intellectual property enforcement. 

He has for many years. And I have discussed this issue and I am 

confident that he will raise it when he is in Russia. It is something 

that he cares about a great deal. 

Mr. GRIFFIN. Great. Thank you. 

Who do we have next? Ms. Chu, you have 5 minutes. 

Ms. CHU. Thank you, Mr. Chair. 

I have questions about international infringement. I know that 

the U.S. Government, through your work and the work of the 

USTR and the work of other agencies, is doing much to press our 

trading partners to respect intellectual property rights. To use a recent example, yesterday the Office of the United States Trade Representative released the Out-of-Cycle Review of Notorious Markets 

spotlighting more than 30 Internet and physical markets that exemplify key challenges in the global struggle against piracy and 

counterfeiting. It identifies these very, very blatant sites, the physical markets that range from Argentina to Ukraine and Internet 

sites such as Baidu of China, the vKontakte of Russia, to Canada’s 

IsoHunt and Sweden’s ThePirateBay. And there they are identified 

just blatantly. 

I am wondering what actions you are going to take since they are 

listed just right there. 

Ms. ESPINEL. Thank you for raising that. 

So as you mentioned, USTR just yesterday issued its report on 

notorious markets that includes both physical markets but also the 

online markets that you mentioned. I think that this report, which 

is part of the Administration’s strategy to put out this report, essentially highlighting or naming and shaming particular websites 

will be useful to us partly to help guide our diplomatic efforts and 

make sure that our diplomatic agencies are coordinated in raising 

concerns with other governments. I think in terms of public awareness and raising public awareness about the dangers of counterfeiting and piracy and where those dangers might be found, this report will be very useful. 

Ultimately, we need foreign law enforcement to do more, and so 

this report is only part of our efforts to try to get foreign law enforcement to take action against sites that are trafficking and inVerDate Aug 31 2005 09:44 Jul 05, 2011 Jkt 000000 PO 00000 Frm 00042 Fmt 6633 Sfmt 6601 H:\WORK\IP\030111\64856.000 HJUD1 PsN: 64856
39 

fringing products. U.S. law enforcement is obviously limited in 

terms of what it can do with respect to overseas markets or overseas online markets, but I think the USTR report will, hopefully, 

help raise awareness of that and, as I said, is part of our overall 

strategy to try to get foreign law enforcement to take more action 

here. 

Ms. CHU. Now, since certain sites have been identified, should 

they be accessible in the U.S.? If we are asking other countries to 

enforce against those sites, shouldn’t we be willing to cut off those 

sites to the U.S. market? 

Ms. ESPINEL. Well, first of all, I think the question of cutting off 

sites to the U.S. markets with respect to any particular site is a 

complicated one and a tricky one. That said, I think you just sort 

of honed in on something that we think is very important, which 

is even with these foreign websites, to the extent they have access 

to U.S. consumers and to the extent there are things that we can 

do to try to limit the market, including the U.S. market, for foreign 

websites, we think that would be very helpful. 

In other words, even if we can’t ultimately eliminate a website 

or take a website down that is based overseas because we don’t 

have a jurisdictional reach, if we can do things to try to reduce its 

ability to reach into the United States and get products to our own 

consumers, we think that could be enormously helpful and we are 

trying to work on that in a number of ways, including with respect 

to getting the Internet intermediaries to take more voluntary actions. So I think that is very important. 

Ms. CHU. Are you talking about only voluntary actions or anything more forceful? 

Ms. ESPINEL. Well, I think, again, you are talking about foreign 

sites. So our law enforcement is limited in terms of what they can 

do. And there may be legislative fixes that would give our law enforcement more additional authorities, and we would like to work 

closely with Congress on any ideas that they have for legislative 

fixes. 

But I think assuming the legal regime exists as it is today, two 

things that we can do: one, try to encourage the private sector to 

take steps to reduce the reach to U.S. consumers and to try to encourage foreign law enforcement to take responsibility for its sites 

or for activity that is going on within their borders and to take action. 

Ms. CHU. Well, let me try this question. President Hu’s visit provided an opportunity for President Obama to emphasize the importance of IP protection to the U.S. He raised this concern by noting 

that Microsoft estimates that only 1 in 10 users of Microsoft products in China actually pay for the legal copies. If American companies are going to compete in the global marketplace, we truly have 

to address this problem. 

So based on your experience, what more can the U.S. do to promote intellectual property enforcement in China? 

Ms. ESPINEL. As you mentioned, during President Hu Jintao’s 

visit, President Obama had the opportunity and took the opportunity to raise the need for better enforcement by China repeatedly 

and forcefully with China. China has also heard in recent months 

the level of concern from senior Administration officials across the 

40 

Administration. Secretary Geithner, Secretary Locke, Attorney 

General Holder, and others have all raised this. 

There are a number of things that I think that we can do to try 

to improve the situation in China. Ultimately, though, China needs 

to take action for itself. Attorney General Holder and ICE Director 

Morton traveled to China in the last 6 months to press their counterparts for the need to do more directly. It is actually the first 

time an ICE director has ever gone to China. 

In addition to that, while the numbers may not be impressive to 

everyone, trying to get IP personnel, law enforcement personnel 

placed in China—part of the reason that we want to do that is because having personnel there on the ground can help build the relationships with foreign law enforcement that we need in order to 

get them to take action. 

Beyond that, the JCCP and the SED and President Hu Jintao’s 

visit, probably most importantly, was an opportunity—and we took 

that opportunity—to have China make commitments with respect 

to the software problem that you mentioned with respect to not 

tying its innovation policies to procurement preferences, which is a 

very important issue. And so one of the things that we need to do 

as a Government is follow up and make sure that China follows 

through on those commitments. 

Ms. CHU. Thank you. I yield back. 

Mrs. ADAMS [presiding]. Thank you. 

The gentleman from Arizona, Mr. Quayle, for 5 minutes. 

Mr. QUAYLE. Thank you, Madam Chairman. 

Thank you, Ms. Espinel. 

I want to go back to the penalty disparity between streaming and 

downloading illegally. And I know that you are going to have a 

white paper and I really look forward to reading that. But if you 

could give me kind of just the bird’s eye view or the Cliff Notes 

version of what do you think is the correct solution to solve this. 

Is it just simply making it so illegal streaming of copyrighted material is now a felony or is it something else that we can kind of get 

behind? Because it doesn’t seem like that big of a—not a difficult 

task to actually improve that part of the enforcement provisions. 

Ms. ESPINEL. Well, far be it for me to comment on what is difficult legislatively and not to accomplish. 

I do think having infringement not clearly identified as a felony 

does hamper our enforcement efforts in terms of the types of cases 

that prosecutors are going to focus on in terms of the types of penalties that are going to be assessed for that activity. So I think that 

is a significant issue that we are considering and, again, hope to 

have a recommendation to you on that very soon. 

Assuming that we and you are in agreement that it makes sense 

to fix this deficiency, then obviously we then need to have law enforcement take advantage of that and start bringing the cases. So 

I don’t know if that is what you were alluding to. That would clearly be part of it or that clearly sort of the end result here is to get 

more law enforcement action. But I think one of the things we are 

seriously considering is whether or not this legislative fix would 

help our law enforcement be able to do that. 

Mr. QUAYLE. And also previously in your testimony, you were 

talking about how the private sector has been helping you, espeVerDate Aug 31 2005 09:44 Jul 05, 2011 Jkt 000000 PO 00000 Frm 00044 Fmt 6633 Sfmt 6601 H:\WORK\IP\030111\64856.000 HJUD1 PsN: 64856
41 

cially with pharmaceutical infringements on the Internet. What 

role do you see the private sector helping you in really reducing IP 

Internet theft going forward? 

Ms. ESPINEL. I think they could be helpful in a number of ways, 

and we are having discussions with, again, various types of Internet intermediaries about a whole range of IP infringement issues, 

including copyright issues, trademark issues. I think voluntary cooperation has the potential to dramatically change things because 

I think Internet intermediaries have the ability to stop infringement from taking place. Now, it is very important to us as an Administration that whatever voluntary solutions are worked out, 

that they work, that they be practical and efficient, that they not 

be unduly burdensome, and that they bear in mind policy principles, even though they are taken by the private sector, that are 

very important to this Administration and to Congress such as due 

process and privacy and other issues. But we think there is enormous potential there if the private sector, if Internet intermediaries step up and take more action to dramatically reduce online infringement. 

Mr. QUAYLE. And this is going to be my final. 

In 2008, Congress passed the PRO-IP Act which established your 

position, and it also authorized appropriations for the Department 

of Justice. Congress then provided increased appropriations to the 

FBI to combat counterfeiting and IP theft. In particular, the FBI 

created 31 IP-dedicated agents in fiscal year 2009, an additional 20 

IP-dedicated agents in fiscal year 2010. The DOJ also assigned 97 

assistant U.S. attorneys to work with CHIP units, with all CHIP 

units having two or more attorneys assigned to it. 

However, a recent GAO study stated that along with reports 

from FBI and DOJ, pursuant to PRO-IP, indicate that there has 

not been a corresponding increase in IP investigations by these 

agents. I think this is kind of a concern because Congress was very 

specific and couldn’t have been clearer with their mandate. 

What corrective actions have you taken to address this issue? 

Ms. ESPINEL. So the FBI had all of their new agents, the agents 

that you referred to, hired, trained, and on the ground as of the 

end of this year. They have been sort of coming in throughout the 

year, but they were all on the ground as of the end of this year. 

Obviously, my office doesn’t get involved in specific prosecutions or 

specific enforcement cases, but we have been talking to the FBI 

and DOJ about their game plan overall to try to use those agents 

as effectively as possible and see increased enforcement actions 

coming out of them. 

One of the things that they have done over the last few months 

is set up—and I am probably going to forget the technical term 

they use for them, but essentially set up sort of regional task forces 

or working groups with the new FBI agents that are on the ground 

in some of the key cities to make sure that those FBI agents are 

both working with the other Federal law enforcement that are already on the ground and on State and local law enforcement to try 

to multiply the effect that they have. 

It is going to take some time, I think, to see prosecuted cases because it takes time to investigate cases and develop them. But one 

thing that we know has happened over the last year, which I think 

42 

is a good indicator of where this is going, is that the number of 

cases that have been opened by the FBI over the past year has increased dramatically. Now, those opened investigations haven’t yet 

turned into prosecuted cases because that will take some time, and 

obviously, let me assure you this issue of how those resources are 

being spent is one that is of great importance to my office. So we 

will continue to work with the FBI and DOJ generally on the overall game plan for enforcement. 

Mr. QUAYLE. So you think that as the FBI agents become more 

familiar with various counterfeiting agencies that are out there, 

then the actual efficiency of bringing people to prosecution, to trial 

will actually be increased in the next couple years? 

Ms. ESPINEL. I do. 

Mr. QUAYLE. Thank you. 

Mrs. ADAMS. The Chair recognizes the gentleman from Florida, 

Mr. Deutch, for 5 minutes. 

Mr. DEUTCH. Thank you, Madam Chair. 

Ms. Espinel, thank you for being here, and I think the accolades 

you have been receiving are well deserved. 

I would like to circle back to Operation In Our Sites again. I discussed the operation with John Morton when he appeared before 

the Foreign Affairs Committee last year, and I appreciate the way 

that ICE took initiative and found ways to tackle the problem within their existing authority. I believe that he and his team deserve 

recognition for innovative and aggressive action to stop theft and 

for doing so, I also believe, with appropriate caution and discretion. 

Millions of people have visited the site since the seizure, have 

seen the seizure notices. And so I asked my staff to investigate 

whether Operation In Our Sites was impacting the online environment. And I learned something interesting that I would like you 

to address. 

One well known music video website that for years had been the 

source of leaks, making videos available illegally before they hit the 

legitimate marketplace, has apparently modified its behavior since 

the ICE seizures. The owner had a successful advertising-based 

business. They did not want to see that jeopardized. So they 

reached out to the music industry how to figure out how to clean 

up his act, and they took remedial action. They continue to operate 

now legitimately after having consulted with industry. 

I wonder if there is other evidence of the deterrent effect of increased Federal IP law enforcement like that that you are aware 

of. 

Ms. ESPINEL. So one of the things that I would point to, which 

you alluded to, in terms of the overall deterrent effect is the number of visitors that have gone to the sites and have seen banners 

saying that the U.S. Government, the DOJ, and ICE have taken action—I think over 36 million citizens have seen those banners at 

this point, and I think that sends a very powerful signal and hopefully acts as a deterrent as well that this is a crime that this Administration takes seriously and that it is not activity that people 

should be engaging in. 

Beyond that, I also understand from law enforcement that there 

are a number of sites that have voluntarily essentially taken themselves down because of Operation In Our Sites. And I think that 

43 

is a great example of the type of deterrent effect that you and that 

Mr. Berman referred to that can go beyond the enforcement actions 

that are taken. 

Mr. DEUTCH. Thanks. 

I wanted to broaden the discussion a bit. All of the discussion 

about online music, stolen music, and stolen film and stolen 

books—the discussion always seems to focus on the Internet intermediaries and what role the ISP’s have in all of this. I would like 

us to focus specifically, though, on something else. 

These entrepreneurs who deal in stolen music and deal in stolen 

film start these websites in other countries not because they think 

they are providing a great service to the youth of our country who 

may choose to go to their sites and partake in this stolen intellectual property. They do it to make money. And if you could speak 

to conversations that you may have had, your ongoing discussions, 

with the credit card companies whose business is crucial to the success of these sites or to either the advertisers directly or those advertising firms whose business is to get eyeballs. They know that 

they will get eyeballs on these sites, so this is what they pursue. 

Can you tell us about the interaction you have had with those 

groups? 

Ms. ESPINEL. Sure, I would be happy to and also hope to be in 

a position to come back to you with more details on that soon. 

So we have talked to a number of the credit card companies and 

other payment processors such as PayPal about steps that they can 

take to stop processing transactions from sites that are engaged in 

exactly in the kind of activity you are talking about, you know, infringement as a money-making venture, infringement as a business. I think those discussions are going well. Some of the companies in particular have sort of stepped up and said that they want 

to do more. I think all the credit card companies that we have 

talked to are seriously considering what more they can do. And we 

sort of very intensely engaged in those discussions and hope, in 

fact, to within a very short time frame be able to report on more 

specifics. But it is something that we are pushing very intensely. 

The other source of revenue that you mentioned is ads. I think 

that is also a very important one and consistent with our overall 

approach. So we have been talking to a number of ad brokers. We 

have been talking to some of the companies that advertise, legitimate companies that advertise on the Internet but find their ads 

ending up on pirate sites where they don’t want them to be. We 

are actually convening a meeting later this week with a number of 

companies that have ad networks on the Internet to see whether 

or not there is more that they can do. So I would be happy to come 

back to you on those discussions as they move forward, but it is 

something that we are actively working on. 

Mr. DEUTCH. Thank you, Ms. Espinel. 

I will yield back. 

Mrs. ADAMS. Thank you. 

The Chair recognizes myself for 5 minutes. 

You mentioned in your testimony that part of the Joint Strategic 

Plan on Intellectual Property Enforcement—one of the priorities is 

make sure that the U.S. does not purchase or use infringing prodVerDate Aug 31 2005 09:44 Jul 05, 2011 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6601 H:\WORK\IP\030111\64856.000 HJUD1 PsN: 64856
44 

ucts. Can you elaborate on the specific steps you are taking or have 

taken? 

Ms. ESPINEL. Yes, I would be happy to. 

So in January we issued a statement that went out to all the 

Federal procurement officers of the U.S. Government setting out 

the Administration’s policy in two areas: one, for us to be technology neutral in our procurement but also reminding the Federal 

agencies that all technology has to be properly licensed. So that is 

something that we already did and is publicly available. 

There are at least two other issues in this area that we are actually working on. I will mention them briefly. 

One is with respect to our contractors, the Federal contractors, 

and the software that they use. One of the things that we committed to do and will do is review our policies with respect to Federal contractors that use software. It is very important to us that 

those—not just the U.S. Government but those who are doing business with the U.S. Government also respect intellectual property. 

And we hope to have that review done shortly. 

And then the second issue I would mention, which I think is one 

of critical importance, is we have a problem with counterfeit goods 

entering the U.S. supply chain across all agencies. In our view, 

that is a particularly critical problem when you are talking about 

the Department of Defense, NASA, our military, and our critical infrastructure. So we have been working very intensely with DOD 

and NASA on a number of recommendations to try to address that 

problem. I think we are still in the middle of that process but I 

think it is safe to say that that is probably going to be some combination of policy changes, possibly regulatory changes, and I dare 

say legislative changes that we would like to work with Congress 

on. It is an extremely complicated issue, but we hope to have a set 

of recommendations to you within the year certainly and hopefully 

as soon as we can. 

Mrs. ADAMS. I am going to go back to a question you had earlier, 

and I want you to, if at all possible, just answer yes or no, just 

make it that easy. Details. Are they more efficient, more effective? 

Yes or no? 

Ms. ESPINEL. It is a very difficult question to answer yes or no. 

Mrs. ADAMS. That is what I am looking for. You prefer not to answer it? 

Ms. ESPINEL. Yes. I mean, I think it is difficult to say that details are more efficient. 

Mrs. ADAMS. So they would be less efficient and less effective. 

Ms. ESPINEL. I think what is important, you know, at this point 

we have the budget we have, and we and the team of details have 

been tremendous in trying to work with what we have and—— 

Mrs. ADAMS. I understand. I listened to you earlier. I was trying 

to get to the core of it. As you know—and I think you understand 

where I am going with this. So would it be your opinion that details are less effective, less efficient. Yes or no. 

Ms. ESPINEL. I think it is difficult for me to answer that question. 

Mrs. ADAMS. Okay. 

The Chair recognizes the gentlelady from Florida, Ms. 

Wasserman Schultz, for 5 minutes. 

45 

Ms. WASSERMAN SCHULTZ. Thank you to the gentlelady from 

Florida. 

Ms. Espinel, it has been really interesting and helpful to listen 

to your testimony and your answers to questions. 

I appreciate the fact that you have been able to help work with 

companies like MasterCard, American Express, which is a constituent company in my district, on not enabling pirate websites by 

helping to make sure that those companies no longer process transactions on those sites. So I am glad to hear that some of those businesses are beginning to do their part. 

But I want to go back to rogue websites that Mr. Berman talked 

about earlier because many of those get their primary source of 

revenue from advertising. I want to ask unanimous consent, 

Madam Chair, to admit these two screen shots to the record. 

Mrs. ADAMS. Without objection. 

[The information referred to follows:] 

46 


64856B-1.eps
47 


64856B-2.eps
48 

Ms. WASSERMAN SCHULTZ. Thank you very much. 

Many people assume that these rogue websites are legitimate. 

There are blue chip companies that are advertising on them. They 

are advertising. Those advertisements appear right next to supposedly free content. 

This screen shot right here from the website buzznet offers free 

downloading of the movie ‘‘Hall Pass,’’ which just came out this 

weekend and is only in theaters right now. General Electric and 

punchbowl are the advertisements that are right on this website. 

I don’t think GE or punchbowl have asked to have their ads put 

on websites that promote illegal content. 

And then this other screen shot is from the blogspot site. It also 

is promoting free live streaming of ‘‘Hall Pass.’’ It has a series of 

ads by Google on it. I understand that Google owns blogspot. So 

perhaps there is an inference to be made that Google, by putting 

its own ads on a site that it owns with clearly infringing materials, 

is facilitating this conduct. 

On the same blogspot web page, there is also an ad for Starwood 

Hotels, another blue chip company. I don’t think Starwood asked 

to have their advertisement listed on a site with illegal content. 

I mean, there are two significant problems. There are more, but 

significant ones include that—I mean, online advertising is making 

piracy profitable, and that is a huge problem. And online advertising makes piracy seem falsely legitimate. Those are two huge 

problems. 

I would like a little more detail in your answer than you gave 

to Mr. Berman. What can be done to make the online advertising 

marketplace safe for companies that want to be good corporate citizens? They are not asking to have their ads placed on these sites, 

and they are accidentally promoting piracy as a result. 

Ms. ESPINEL. First, let me just say I think you set out the problem exactly, and we are in complete agreement. I think there are 

two separate problems with advertising. One is that it makes sites 

appear legitimate when they are not legitimate. And I have, in fact, 

had members of the public say, oh, well, this site—look, there are 

ads on it from, you know, X large, legitimate—you know, X company. Therefore it must be legal. And we all know that that is not 

true, but it is not surprising that the public might have that reaction. So in terms of helping these sites obtain legitimacy and confuse the public, that is an enormous problem, and it is also an 

enormous problem because it is a source of revenue. So it allows 

these sites to exist and to keep running. 

In my view—just my view—I think there are sort of two different 

angles that we come at to try to address this problem. Part of that 

is working with the ad networks, so working with the companies 

that place these ads on the sites, and seeing if there is more that 

can be done to make sure that ads aren’t placed on illegal sites. 

And part of it is working with the advertisers. So working with the 

big companies that you named who I don’t believe—and certainly 

in our discussions that we have already started having with them 

don’t want their ads on these sites and seeing if there is more that 

they can do to make sure that their ads aren’t, in fact, placed on 

these sites. 

49 

So I think it is enormously important, and we are having both 

of those discussions in parallel because I think one of those alone 

might address it, but we are going to try to attack this on as many 

fronts as we can, and we hope to be able to make progress on that 

over the next few months. 

Ms. WASSERMAN SCHULTZ. Thank you. And I would think that 

there would be a way, a mechanism that you could establish or 

that you could negotiate that could be established where there 

could be more of a review before ads are placed because it doesn’t 

appear—there couldn’t possibly be one that exists now or there 

wouldn’t be as many legitimate ads on illegal sites or sites promoting illegal content. 

Ms. ESPINEL. Yes. I mean, this is not to say we don’t think something can be done. But I do want to emphasize it is technologically 

complicated, and just because it is technologically complicated 

doesn’t mean it can’t be accomplished. But there are, as I understand, literally billions of these ads being placed every day because 

of the way e-commerce works. So it is not a simple endeavor but 

I think there is more that can be done and we are working with 

the companies that we think could help us to see how we can do 

that in a practical and efficient way. 

Ms. WASSERMAN SCHULTZ. Thank you. I know my time has expired and I won’t ask the question on the record. But I would like 

to talk to you about the whole issue of taking down sites with illegal content and the time frame that sites like Google utilize. I 

mean, there is far too lengthy a period of time and a frustrating 

process in terms of their responsiveness, not just Google, but others. So if we could have an opportunity to talk about that, that 

would be helpful. Thank you. 

Thank you. I yield back. 

Mr. GOODLATTE [presiding]. I thank the gentlewoman. 

And it is now my pleasure to recognize the Chairman of the Government Oversight and Reform Committee, the gentleman from 

California, Mr. Issa. 

Mr. ISSA. Thank you, Mr. Chairman. 

Ma’am, it has been helpful to wait and listen to some of these 

others. I came in a little late. 

I have got a number of questions. Some of them will be deja vu 

because they have already been asked. 

Ms. Chu of California had asked you about sort of the domestic 

versus overseas, and you didn’t really answer the question. 

So you have been on the clock for a year and 3 months. You have 

got a year and 11 months left until the President’s term is over 

presumably. Unless there is an extension by him or his successor, 

you don’t have another term. So you are getting closer to halfway 

through. 

And if I understood correctly—and correct me if I am wrong on 

any of these—Congress gave you significant new resources in both 

FBI and U.S. attorneys and the best answer you could give was we 

have opened more cases but there is a delay in prosecution. So you 

have to wait on that. 

It seems like 2 years after that new authority and the ramping 

up of these individuals—they didn’t come like fresh out of grammar 

50 

school. They came as FBI agents with prior experience. They came 

as U.S. attorneys that did not just get their law degree yesterday. 

First of all, why is it that you can’t show us positive results after 

2 years and hundreds of millions of dollars invested, if you know? 

Ms. ESPINEL. So, first of all, I want to clarify something. I didn’t 

mean to say or imply that there had been a delay in prosecutions. 

I don’t think there has been any delay. 

Mr. ISSA. No, it wasn’t a question of delay though. But you had 

said, look, they have opened more cases, but it is going to take time 

to get to where that turns into prosecutions. The Congress invested 

2 years ago substantially. It has ramped up. These are not brand 

new people. An assistant U.S. attorney is supposed to arrive day 

1 as a qualified prosecutor or they don’t get the job. It’s not a beginner’s position. 

So my question to you is why is it Congress should not be impatient that not enough is happening and that it appears as though 

the status quo of we are forming nexuses, we are leveraging more 

individuals, we are trying to get more for our money, when in fact 

you have 2 years under your oversight—not your command, but 

your oversight—that we are not getting it. Do you have an answer 

to that question? 

Ms. ESPINEL. So what I want to clarify in terms of the timing is 

that the FBI agents that were put in place were all in place as of 

the end of this year. So they have not been in place for 2 years. 

They have been—— 

Mr. ISSA. You said 31 and 20. You had 31 for more than a year, 

20 as of the end of the year. 31 FBI agents on board for more than 

a year and you are not coming to us with tangible results. 

I will move on and let you answer for the record, and if you don’t 

mind, I will submit a detailed question for the record as to that. 

Getting past opened cases, there was a question from the 

gentlelady from Florida, if I understood it correctly—and it is an 

extremely good question that we are interested on both sides of 

aisle. Within your oversight of what should be done, you said you 

don’t have jurisdiction overseas, and yet if there is a legitimate 

U.S. ad being placed on a banner of a pirater, there is a conduit 

benefit. There is a benefit to that advertiser in that if they get ads, 

any revenue, anything at all, they have benefitted from piracy. 

They are a willing participant in piracy because the reason that ad 

got a hit is because somebody went to the pirated space. 

Have you explored and/or begun any possible prosecution of people who advertise and thus make piracy profitable? It is not hard. 

You don’t need new jurisdiction, as far as I know—new authority. 

There are laws on the books that would allow that prosecution at 

least to be attempted. Have you looked into it? 

Ms. ESPINEL. I should speak to DOJ before answering that question because there may be pending investigations I would not be 

aware of. 

Mr. ISSA. The question really was simple. Have you looked into 

it? 

Ms. ESPINEL. But what my office has been looking into is working with the advertisers to try to have them pull those ads off of 

the sites so that sites are not using them as a viable—— 

51 

Mr. ISSA. Ma’am, your position was created to make a difference. 

If you are negotiating with people who are willing participants and 

are gaining from criminal activity, that you agree is criminal activity but you are telling us is outside your reach, then in fact you 

are talking to the enablers and telling them to quit enabling. Well, 

you are not going after them as, in fact, criminals in that process 

because they are, in fact, participants and benefitting. Have you 

explored that theory in the 1 year and 3 months you have been on 

the job? 

Ms. ESPINEL. Well, we think there is a great deal of potential in 

talking to advertisers or talking to these companies and seeing 

what they will do on their own. That said, our overall goal is to 

reduce infringement. So if that approach doesn’t work, we will, of 

course, consider other approaches, including possible legislative approaches. 

Mr. ISSA. I keep hearing about legislation, but if you don’t prosecute credit card companies who are participants and knowingly 

participating in this, then you are missing an avenue if you are not 

at least trying it. If you don’t go after the profits from ads, then 

you are not trying. 

And on top of that, I will add one more for the record that I’m 

sure you haven’t looked at. If the FCC can come out and say that 

they can enforce net neutrality because they have authority over 

the Internet, then the FCC has an absolute right to deal with 

whether access into our country occurs by these transmissions, if 

you will, of material which is illegal, unauthorized, and inappropriate. Will you please commit to at least talk to the FCC and look 

at whether or not their relationship with ISP’s that they now have 

asserted control could, in fact, bring a difference to this on your remaining 1 year and 11 months? 

I thank the gentleman and yield back. 

Mr. GOODLATTE. I thank the gentleman. 

And I now recognize the gentlewoman from Texas, Ms. Jackson 

Lee. 

Ms. JACKSON LEE. Thank you very much. 

Mr. GOODLATTE. We have 10 and a half minutes remaining in 

the vote. 

Ms. JACKSON LEE. Thank you, Mr. Chairman. 

I have a different opinion. I think it is almost night and day for 

the work that you have been able to do over the last, say, 8 years 

as we look back on a previous Administration. 

So let me try and expand what you are doing. I think it is important to note I am looking at the spotlight here, and I see more a 

blueprint that talks about the various initiatives that you have 

had. So I am going just allow you to take these two questions. I 

don’t want to recount all that you have done. I am probably going 

to want to have maybe a one-on-one meeting with you to be able 

to address some particular issues. 

But there are a lot of countries in South Asia and throughout 

Asia, if you will, that have unfortunately been notorious on taking 

intellectual property, particularly software and other hard goods, if 

you will. Can you give me specifically what you think under your 

leadership and the Obama administration and the authority that 

we have given you in Congress that you have actually done to be 

52 

able to impact on that? And forgive me if you have said it, but I 

want to hear it again. 

And the last point I want to ask you is the question about this 

whole issue of jobs. I think intellectual property theft is directly 

connected to American jobs, and I am ravaged about the jobs lost 

because of intellectual property violations and I am interested in 

your Administration and Mr. Obama’s administration, the President’s administration, being called, if you would like to say it, ‘‘wild 

dogs’’ on this issue. So my question is how many jobs would you 

estimate would be created in the United States in the next year if 

the Office of Intellectual Property Enforcement Coordinator is successful in achieve the Joint Strategic Plan and in thwarting counterfeiting activities? And do you have job creation in your mind as 

you do your job? 

Ms. ESPINEL. I have job creation in my mind every day. I had 

job creation in my mind before I took this job. I think that was the 

issue I most want to focus on in terms of sort of my own personal 

success that comes out of this job. I think if I leave this job feeling 

like I saved someone from losing their job and hopefully create 

more jobs for the American people, I will feel like this was a success. That is enormously important to what we do every day. 

You asked a question about data and the number of jobs that are 

going to be created. That is an excellent question. It is not something the U.S. Government has looked at before, but it is actually 

one of the things that my office is doing with the Department of 

Commerce and with a whole group of chief economists from across 

the Administration. We are working on what will be the first U.S. 

Government economic analysis of the number of jobs and the number of exports that are created by our IP industries across our entire economy. And I think that will be enormously helpful to us as 

we are moving forward with policy decisions. 

But job creation is one of the absolute top priorities that we 

have. Increasing exports is also a big priority, but that feeds right 

back into job creation, as you know. In general, innovation is incredibly important to our economy. Without IP enforcement, we 

will lose our innovation unfairly to competitors overseas. So that is 

in our mind every day. 

Mr. CHABOT. Would the gentlelady yield for just one moment? 

Just very brief. 

Ms. JACKSON LEE. I will yield to the gentleman. 

Mr. CHABOT. Thank you for yielding. 

I would ask the Chairman if I could ask a question in writing 

and ask for the response in writing. 

Mr. GOODLATTE. Yes. We will provide for all Members to submit 

questions in writing within 5 days, 5 days legislative days. 

Mr. CHABOT. Thank you and I thank the gentlelady. 

Ms. JACKSON LEE. My pleasure. 

May I quickly just—you know that—well, let me just say I am 

a believer that the genius of America is founded in small businesses and minority businesses. They invent things. Do you have 

a focus in your office? And they are hurt the most. They have no 

big lawyers when their intellectual property is co-opted. Do you 

have a strong emphasis on protecting those little ones who don’t 

have the resources to protect themselves who create major jobs in 

53 

the United States? Minority, small businesses, women-owned businesses. 

Ms. ESPINEL. I was just going to say small businesses not only 

create ideas but they also create our jobs. So they are a big focus 

for us. 

One of the concerns I have is that as we are pushing to increase 

exports from our small businesses in overseas markets, which is 

very important and we want to do that, but we also don’t want our 

small businesses to end up in markets where they are not protected and they don’t have the resources or the experience that 

some other companies do to try to protect them. So one of the 

things that we are doing with the Department of Commerce is to 

see if there are new and innovative ways that our Government can 

help our businesses so they know when they are in those overseas 

markets that we are 100 percent behind them and are supporting 

them. We don’t want to put them in a position where the jobs that 

they create and the exports that they are trying to increase are in 

danger because of IP infringement. 

Ms. JACKSON LEE. Let me thank the Chairman and the Ranking 

Member. 

Your enforcement is imperative to create and save jobs in the 

United States of America. Let me thank you for your service. 

I yield back. 

Mr. GOODLATTE. I thank the gentlewoman. 

And I would like to thank our witness, Ms. Espinel, for enduring 

a good battery of questions here, and we are going to have some 

more headed your way too as we will submit some to you in writing. 

Without objection, all Members will have 5 legislative days to 

submit to the Chair additional written questions for the witness 

which we will forward and ask the witness to respond to as 

promptly as she can so that her answers may 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, again I thank Ms. Espinel and the Members of 

the Committee, and this hearing is adjourned. 

[Whereupon, at 3:52 p.m., the Subcommittee was adjourned.] 

(55) 

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

56 

f 


64856C.eps
57 

Response to Post-Hearing Questions from the Honorable Victoria A. Espinel, U.S. 

Intellectual Property Enforcement Coordinator, Executive Office of the President 


64856D-1.eps
58 


64856D-2.eps
59 


64856D-3.eps
60 


64856D-4.eps
61 


64856D-5.eps
62 


64856D-6.eps
63 


64856D-7.eps
64 


64856D-8.eps
65 


64856D-9.eps
66 

f 


64856D-10.eps
67 


64856E-1.eps
68 


64856E-2.eps
69 

Æ 


64856E-3.eps