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FULL COMMITTEE HEARING ON THE IMPACT 

OF INTELLECTUAL PROPERTY 

ON ENTREPRENEURSHIP AND JOB CREATION 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

SECOND SESSION 

HEARING HELD 

JULY 21, 2010 

Small Business Committee Document Number 111-074 

Available via the GPO Website: http://www.access.gpo.gov/congress/house 


Congress.#13
HOUSE COMMITTEE ON SMALL BUSINESS 

NYDIA M. VELA ́ ZQUEZ, New York, Chairwoman 

DENNIS MOORE, Kansas 

HEATH SHULER, North Carolina 

KATHY DAHLKEMPER, Pennsylvania 

KURT SCHRADER, Oregon 

ANN KIRKPATRICK, Arizona 

GLENN NYE, Virginia 

MARK CRITZ, Pennsylvania 

MICHAEL MICHAUD, Maine 

MELISSA BEAN, Illinois 

DAN LIPINSKI, Illinois 

JASON ALTMIRE, Pennsylvania 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

DEBORAH HALVORSON, Illinois 

SAM GRAVES, Missouri, Ranking Member 

ROSCOE G. BARTLETT, Maryland 

W. TODD AKIN, Missouri 

STEVE KING, Iowa 

LYNN A. WESTMORELAND, Georgia 

LOUIE GOHMERT, Texas 

MARY FALLIN, Oklahoma 

VERN BUCHANAN, Florida 

BLAINE LUETKEMEYER, Missouri 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

MICHAEL DAY, Majority Staff Director 

ADAM MINEHARDT, Deputy Staff Director 

TIM SLATTERY, Chief Counsel 

KAREN HAAS, Minority Staff Director 

(II) 

STANDING SUBCOMMITTEES 

Subcommittee on Contracting and Technology 

GLENN NYE, Virginia, Chairman 

YVETTE CLARKE, New York 

BRAD ELLSWORTH, Indiana 

KURT SCHRADER, Oregon 

DEBORAH HALVORSON, Illinois 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

MARK CRITZ, Pennsylvania 

AARON SCHOCK, Illinois, Ranking 

ROSCOE BARTLETT, Maryland 

W. TODD AKIN, Missouri 

MARY FALLIN, Oklahoma 

GLENN THOMPSON, Pennsylvania 

Subcommittee on Finance and Tax 

KURT SCHRADER, Oregon, Chairman 

DENNIS MOORE, Kansas 

ANN KIRKPATRICK, Arizona 

MELISSA BEAN, Illinois 

JOE SESTAK, Pennsylvania 

DEBORAH HALVORSON, Illinois 

GLENN NYE, Virginia 

MICHAEL MICHAUD, Maine 

VERN BUCHANAN, Florida, Ranking 

STEVE KING, Iowa 

W. TODD AKIN, Missouri 

BLAINE LUETKEMEYER, Missouri 

MIKE COFFMAN, Colorado 

Subcommittee on Investigations and Oversight 

JASON ALTMIRE, Pennsylvania, Chairman 

HEATH SHULER, North Carolina 

BRAD ELLSWORTH, Indiana 

MARY FALLIN, Oklahoma, Ranking 

LOUIE GOHMERT, Texas 

(III) 

Subcommittee on Regulations and Healthcare 

KATHY DAHLKEMPER, Pennsylvania, Chairwoman 

DAN LIPINSKI, Illinois 

MELISSA BEAN, Illinois 

JASON ALTMIRE, Pennsylvania 

JOE SESTAK, Pennsylvania 

BOBBY BRIGHT, Alabama 

MARK CRITZ, Pennsylvania 

LYNN WESTMORELAND, Georgia, Ranking 

STEVE KING, Iowa 

VERN BUCHANAN, Florida 

GLENN THOMPSON, Pennsylvania 

MIKE COFFMAN, Colorado 

Subcommittee on Rural Development, Entrepreneurship and Trade 

HEATH SHULER, North Carolina, Chairman 

MICHAEL MICHAUD, Maine 

BOBBY BRIGHT, Alabama 

KATHY DAHLKEMPER, Pennsylvania 

ANN KIRKPATRICK, Arizona 

YVETTE CLARKE, New York 

BLAINE LUETKEMEYER, Missouri, Ranking 

STEVE KING, Iowa 

AARON SCHOCK, Illinois 

GLENN THOMPSON, Pennsylvania 

(IV) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 1 

Graves, Hon. Sam .................................................................................................... 2 

WITNESSES 

Holleyman, Mr. Roberts, President & CEO, Business Software Alliance ........... 3 

Carnes, Mr. Rick, President, Songwriters Guild of America, Nashville, TN ...... 5 

Friedman, Mr. Steven, President, t3 Technologies, Inc., Tampa, FL. On behalf 

of Computer & Communications Industry Association ..................................... 6 

Carnes, Mr. Peter, CEO, Traffax Inc., Silver Spring, MD. On behalf of The 

Association for Competitive Technology ............................................................. 9 

Mansfield, Mr. William, Director of Intellectual Property, ABRO Industries, 

South Bend, IN. On behalf of Motor Equipment Manufacturers Association . 10 

APPENDIX 

Prepared Statements: 

Vela ́zquez, Hon. Nydia M. ....................................................................................... 20 

Graves, Hon. Sam .................................................................................................... 22 

Holleyman, Mr. Roberts, President & CEO, Business Software Alliance ........... 24 

Carnes, Mr. Rick, President, Songwriters Guild of America, Nashville, TN ...... 31 

Friedman, Mr. Steven, President, t3 Technologies, Inc., Tampa, FL. On behalf 

of Computer & Communications Industry Association ..................................... 34 

Carnes, Mr. Peter, CEO, Traffax Inc., Silver Spring, MD. On behalf of The 

Association for Competitive Technology ............................................................. 37 

Mansfield, Mr. William, Director of Intellectual Property, ABRO Industries, 

South Bend, IN. On behalf of Motor Equipment Manufacturers Association . 46 

Statements for the Record: 

Lipinski, Hon. Dan .................................................................................................. 54 

Copyright Alliance ................................................................................................... 56 

eBay Inc. ................................................................................................................... 58

(V) 

(1) 

FULL COMMITTEE HEARING ON THE IMPACT 

OF INTELLECTUAL PROPERTY ON 

ENTREPRENEURSHIP AND JOB CREATION 

Wednesday, July 21, 2010 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 1:00 p.m., in Room 2360 

Rayburn House Office Building, Hon. Nydia Vela ́zquez [chairwoman of the Committee] presiding. 

Present: Representatives Vela ́zquez, Moore, Dahlkemper, Lipinski, Graves, Bartlett, Luetkemeyer and Thompson. 

Chairwoman VELA ́ ZQUEZ. This hearing is now called to order. 

Many of our most successful ventures in America started as a 

note on a napkin, or a dream by an entrepreneur. When these 

ideas blossom into new products and services, they create jobs, a 

critical component of any economic recovery. The success of these 

new ventures requires a system that effectively protects entrepreneur’s ideas from being unfairly copied and stolen. Businesses 

that develop new products need assurances that the economic value 

of their innovations will be maintained. 

At the same time, we must insure the rules are workable. If they 

are overly restrictive, companies that help entrepreneurs reach 

global markets will see their growth curtail. Technological entrepreneurs want to know that innovations like TiVo And Slingbox 

are not hindered, as we seek to protect content creator’s rights. 

Because of our entrepreneur’s productivity, the United States is 

an unparalleled global leader when it comes to new ideas. In fact, 

more than 18 million Americans work in industries with an intellectual property focus. This includes industries where small firms 

are independent television and movie producers, video game designers, some writers, and manufacturers. Collectively, these and 

other industries make U.S. intellectual property worth $5.5 trillion 

operating in hundreds of thousands of small businesses. 

Just as the concept of intellectual property touches many economic sectors, preserving it requires diverse approaches. The Administration recently announced plans to bolster protection of 

American business interests. The private sector has played, and 

will continue to play, an equally important role in protecting intellectual property. Those efforts will be highlighted today, as we look 

at the proactive efforts to meet small business needs. 

As the Internet continues to evolve, we see a cross section of 

businesses who can help reserve U.S. ideas. The advent of e-ComVerDate Aug 31 2005 19:41 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57519.TXT DARIEN
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merce has been a boom to many small businesses. It has also allowed artists and more producers to rapidly disseminate music and 

video content, while reaching new audiences. But the Internet has 

also created opportunities for piracy. 

To assist U.S. companies in the Internet age, content owners are 

taking several steps. They are engaging in consumer outreach and 

education, and, where necessary, taking legal action against infringers. Others are collaborating with video and social networking 

portals to distribute their product. 

In the end, the innovation of entrepreneurs is directly tied with 

the confidence that their ideas will not be stolen. Today’s hearing 

will examine how the system for protecting intellectual property 

can spur job growth, and foster innovation. During every previous 

recession, the creativity of America’s entrepreneurs has led us back 

to prosperity. That will be the same again, today. 

I thank all of our witnesses for taking time out of your busy 

schedule to be here with us to provide your insight into this very 

important issue. And with that, I yield to the Ranking Member, 

Mr. Graves, for his opening statement. 

[The prepared statement of Chairwoman Vela ́zquez is included in 

the appendix.] 

Mr. GRAVES. Thank you, Madam Chair, and thank you for holding this hearing on intellectual property, and my thanks to the witnesses also for being here. I look forward to hearing your testimony. 

On average, intellectual property represents about 70 percent of 

a business’ value, which is a significant increase from the past. 

However, many small businesses assume or don’t understand that 

intellectual property issues affect them just as much as it does 

their larger counterparts. 

The reality is that small businesses have a significant amount to 

gain or lose when it comes to intellectual property protection. Intellectual property laws in the United States are designed to protect 

a company’s ideas. And it’s typically the most valued asset a company usually has to offer. Whether it’s a name, or a logo, or software, videos, new inventions, or literature, laws are in place to protect them. Taking full advantage of U.S. Intellectual Property laws 

helps small businesses, and gives them a better opportunity to be 

successful, and create businesses, or create jobs. 

Protecting intellectual property is critical to our economy, jobs, 

and consumers. A violation of Intellectual Property laws directly affects a company’s brand, its market share, its bottom line, its ability to export, and creates a number of safety concerns for consumers. It’s very easy to see the trickle down effect that this has 

on an economy. And it’s important that the United States maintains an aggressive strategy for protecting these highly valued assets. 

U.S. Customs and Border Protection have seen seizures of counterfeited and pirated goods increase over the past few years. And 

if there’s one bad actor, there’s usually many more hiding. The Administration needs to take, and must take a hard line approach to 

fighting intellectual property violations, both domestically, and 

internationally. The economic consequences are too strong to igVerDate Aug 31 2005 19:41 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57519.TXT DARIEN
3 

nore. And, additionally, engaging the world in a more open trade 

will bring greater transparency to the seedy underworld of counterfeit goods, and help reduce these threats to our economy, while improving consumer safety. 

Again, Madam Chairman, I want to thank you for holding this 

hearing, and I’m looking forward to our witnesses. 

[The prepared statement of Mr. Graves is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you. 

The Chair recognizes the gentlemen from Illinois for a unanimous consent request. 

Mr. LIPINSKI. Thank you, Madam Chairwoman. I want to thank 

you for holding this hearing, and Ranking Member Graves for holding this hearing. 

I want to ask unanimous consent to insert an opening statement 

for the record, look forward to hearing from the witnesses. And I 

consider South Bend to be part of the Chicago area, since you’re 

going to have Mr. Mansfield here from ABRO Industries with us. 

[The prepared statement of Mr. Lipinski is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Hearing no objections, so ordered. 

The gentleman is recognized. No? Okay. 

The Chair now will introduce Mr. Robert Holleyman. He is the 

President and CEO of the Business Software Alliance. Mr. 

Holleyman has headed the Alliance since 1990, overseeing its BSA 

operations in more than 85 countries. BSA is the largest software 

industry trade organization, working with international governments to advance the industry’s goal. 

The gentleman has five minutes to make his presentation. Welcome. 

STATEMENT OF ROBERT HOLLEYMAN 

Mr. HOLLEYMAN. Madam Chairwoman, Ranking Member Graves, 

thank you for inviting the Business Software Alliance to testify. 

Small business is an integral part of the success of the software 

industry. 97 percent of the software firms in this country are small 

businesses, three-quarters of the software firms in America have 

fewer than 20 employees, and we believe that the success of these 

businesses is an integral part of the entrepreneurial spirit, as well 

as the economic leadership of this country. 

America’s copyright industries lead the world, and that’s a great 

thing for us to be excited about. And the software industry is, by 

far, the largest of the copyright industries. Software and related 

services sector employs more than 2 million Americans at jobs that 

are twice the national average wage, and the software industry 

contributes a $37 billion positive trade surplus for the U.S. 

All software companies partner, as well, with resellers, integrators, and other software developers, most of which are small businesses. For example, Apple, a BSA member, provides technology 

and tools for developers, including more than 43,000 partners who 

have created software for the iPhone and iPad. These developers 

4 

are overwhelmingly small businesses and individuals, and have 

earned more than $1 billion from App Store sales to date. 

Symantec, and Microsoft, and other BSA members have partner 

programs for thousands of small businesses. Microsoft, for example, 

has 640,000 partners in its network, and about 15,000 of those 

were here in Washington last week for a partner conference at the 

Convention Center. 

This entire software industry is built on the foundation of intellectual property protection, and that is rooted in our Constitution. 

But our industry faces a substantial problem from software theft. 

In the U.S., one in five PC applications installed last year were stolen, and we have the lowest percentage rate of software piracy in 

the world here in the U.S. Many countries have much higher rates. 

For example, China has a rate of software piracy of 79 percent. 

Now, small developers are particularly threatened by software 

theft. They often lack the resources to fight infringement, and they 

have fewer product lines across which to spread the risk. But the 

economic harm from illegal software use goes far beyond the software industry. And, indeed, this is the untold story. 

Most software theft occurs when an otherwise legal business 

makes illegal copies of software for their workplace. This gives 

them an unfair cost advantage, because software is a critical tool 

of production. And these businesses compete unfairly with companies, large and small, across all sectors of the economy that respect 

the law. So, internationally, while most businesses in high piracy 

countries like China, steal the software they use to run their companies. The vast majority of their U.S. competitors pay for their 

software, as they should. 

Simply put, overseas producers from high piracy markets compete unfairly with U.S. companies, undermining the sales of U.S. 

goods, and displacing American jobs. 

In conclusion, I would like to congratulate Congress and the Administration on the release of the first Joint Strategic Plan on IP 

Enforcement. One month ago today, Vice President Biden unveiled 

this plan with Victoria Espinel, the first ever U.S. IP Enforcement 

Coordinator. Her office, and the Strategic Plan, itself, were mandated by Congress in the bipartisan Pro IP Act of 2008. 

The Plan calls for specific actions, including promoting enforcement of IP overseas, improving coordination among law enforcement resources in this country, and serving as a model for the rest 

of the world by insuring that government agencies, and federal contractors manage and protect IP assets in the workplace. 

I urge this Committee and Congress to insure robust implementation of this plan, particularly as it pertains to small business. 

U.S. leadership in software depends on the success of small business, and that hinges on effective protection of IP for everyone. 

Thank you for the opportunity to testify. 

[The prepared statement of Mr. Holleyman is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Holleyman. 

Our next witness is Mr. Rick Carnes. He is the President of the 

Songwriters Guild of America, located in Nashville, Tennessee. Mr. 

Carnes is a working songwriter who has co-written number one 

5 

songs for Reba McEntire, ‘‘I Cannot Even Get The Blues,’’ and 

Garth Brooks, ‘‘Longneck Bottle.’’ The Songwriters Guild was 

formed as the Songwriters Protective Association in 1931, and promotes the profession of songwriting. Welcome. 

STATEMENT OF RICK CARNES 

Mr. RICK CARNES. Thank you so much, Chairwoman Vela ́zquez, 

and Ranking Member Graves for the opportunity to testify on the 

impact of intellectual property on entrepreneurship and job creation. I would also like to take a moment to thank Fred Cannon 

of BMI, and Cindi Tripodi of the Copyright Alliance for their assistance in alerting me to this hearing. 

My name is Rick Carnes, and I’m President oft he Songwriters 

Guild of America. The SGA is the nation’s oldest and largest organization run exclusively by and for songwriters. I am a professional 

songwriter living and working in Nashville, Tennessee since 1978. 

While I’ve been fortunate enough to have a modicum of success in 

my career writing number one songs for both Garth Brooks and 

Reba McEntire, along with songs recorded by Dean Martin, Steve 

Wariner, Alabama, Pam Tillis, Conway Twitty, among others, I’m 

constantly reminded of the perilous existence of all of us who have 

chosen songwriting as a profession. 

Critical for this Committee is the fact that professional songwriters are not employees. We are self-employed small business 

people, and the songs we write produce jobs everywhere you look. 

Practically everything in this country is sold with music. Examples 

abound, just turn on the TV and listen to the car commercials. 

Every restaurant provides music with your meals. Fashion follows 

music, sporting events have music, technology is tied at the hip to 

music. The iPad and the iPhone, and practically everything else 

that starts with an ‘i’ delivers and plays music. Can anyone deny 

the resurgence of Apple computers was tied directly to the iPod, 

and iTunes as a music delivery service? Search engines sell huge 

amounts of advertising on searches for songs. And music file 

downloading was and is a major driver in the adoption of 

broadband Internet service. 

Songwriters’ jobs are valuable to the economy, and totally green. 

No smoke stacks or heavy infrastructure costs are needed for song 

creation. The only resource we depleted is pencil erasers, and the 

only thing we spill is coffee. 

Every single job in the music industry springs from a hit song. 

Unlike recording artists, songwriters don’t make money from live 

shows, or selling merchandise, because we don’t perform. And, 

frankly, we’re not that pretty. We’re the folks who sit in a room 

along with a guitar, and a blank page, and a burning desire to tell 

our story through music. 

As professional songwriters, we make all of our money from copyrights. The income from those copyrights come primarily from two 

sources, CD sales, and if we’re lucky enough to get a single, we get 

performance money when the song is played on radio or TV. But 

songwriting as a profession is vanishing. 

Songwriters can no longer depend on record sales for a major 

part of their income in a market where it is estimated that 20 

songs are stolen on line for every song that’s sold. The music pubVerDate Aug 31 2005 19:41 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57519.TXT DARIEN
6 

lishers are not contracting staff songwriters any more. It’s too risky 

to advance money for songs in a market that doesn’t protect those 

songs from theft. 

The last music publisher I signed with had 12 professional songwriters on staff in 1998, the year of Napster. By 2008, they had let 

go of all of their staff writers, including myself and my wife. 

We need to establish new business models for digital music delivery that will insure the protection of copyrighted songs, while giving consumers a great experience with music at a fair price. Unfortunately, it is very difficult to establish those business models, 

when the entrepreneurs we need to fund those ventures have to 

compete in a marketplace glutted with stolen music. 

It is the hope of songwriters everywhere that technological innovation will help find a solution to the problem of music piracy. In 

that regard, the SGA supports the development of high performance content delivery networks that could give consumers a better, 

safer experience in accessing music on line. In this way, we might 

be able to compete with the virus ridden, poor quality, illegal copies 

of copyrighted songs you so often find on peer-to-peer services. 

In closing, let me recount an experience that is happening all too 

often to me with my discussion with songwriters today. I met a legendary country song writer in a coffee shop last month in Nashville, and he told me he’s now selling ammunition at gun shows instead of writing songs. When I asked him if he was ever going to 

start writing again, he said, and I quote, ‘‘Why bother?’’There will 

always be people who are moved by the muse to write the occasional song, but without a way to sell their music and make a living, the professional songwriters that made American music the 

envy of the world, will pursue other jobs that pay a liveable wage, 

jobs where their work and their rights are respected, and protected. 

In conclusion, Ms. Chairwoman, and members of the Committee, 

SGA truly appreciates your efforts on behalf of small business people like us. We look forward to working with you to enliven job creation in the music industry through the protection of intellectual 

property rights, and the encouragement of technological innovation 

in the delivery of music. SGA and I stand ready to be a part of that 

effort. Thank you so much. 

[The prepared statement of Rick Carnes is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Carnes. 

Our next witness is Mr. Steven Friedman. He is the President 

of T3 Technologies located in Tampa, Florida. T3 Technologies has 

provided main frame computer solutions to the small and mediumsize business community since 1992. Mr. Friedman is testifying on 

behalf of Computer and Communications Industry Association, representing companies in the computer, Internet, information technology, and telecommunications industries. Welcome. 

STATEMENT OF STEVEN FRIEDMAN 

Mr. FRIEDMAN. Thank you, and good afternoon, Chairwoman 

Vela ́zquez, Ranking Member Graves, and members of the Small 

Business Committee. First, I want to thank you for allowing me to 

7 

tell my story here today. I’ve been a small business owner for 19 

years, and it’s a label that I’m very proud to wear. 

Let me say, first, that I do not disagree that intellectual property 

can be of great help to small businesses in commercializing their 

ideas. However, my recent experiences have proven to me that the 

current IP system is a bit out of balance, and that our imbalanced 

Intellectual Property laws actually hinder innovation, disproportionately so for small businesses. 

This reality was recognized recently by Justice Stevens in one of 

his final Supreme Court opinions in Bilski v. Kappos, in which he 

wrote, and I’m quoting, ‘‘Even if a patent is ultimately held invalid, 

patent holders may be able to use it to threaten litigation, and to 

bully competitors, especially those that cannot bear the costs of a 

drawn out, fact- intensive patent litigation. That can take a particular toll on small and upstart businesses.’’ 

I, personally, hear a lot of talk about intellectual property and 

its importance to small business, but from where I sit, IP is really 

just a complicated regulatory system. This regulation of knowledge 

and ideas has expanded into many areas of our economy. AS with 

any regulation, big business figures out the best ways to navigate 

the system, while the little guys who don’t have the high priced 

legal teams at their disposal get tied up with paperwork and lawsuits, or simply eliminate innovative ideas from their plans in 

order to avoid such paperwork and lawsuits. 

My story is fairly technical and complicated, but the lesson is 

simple; intellectual property can be as much a danger to small 

business as it is a benefit. A large firm can use the current Intellectual Property laws to effectively put smaller rivals that threaten 

its bottom line out of business. 

Let me first briefly explain the market I’m in. Until recently, my 

company built computer systems that were capable of running 

IBM’s mainframe operating system, similar to the way Dell and HP 

build systems that run Windows. Although some people are unfamiliar with mainframes, or may think them as relics, in reality, 

they power much of the world that we live in today. They are the 

computing power behind ATMs, health care records, global stock 

markets, the Social Security Administration, just to name a few, 

and 70 percent of the world’s government and corporate data is 

stored on mainframes. It’s estimated up to $5 trillion in business 

assets reside on these systems. My small company sold such mainframe systems to Fortune 500 businesses, the U.S. military, NATO, 

and a large number of city and county governments. 

I employed over 50 people who served nearly 1,000 customers in 

28 countries selling our mainframe solutions to former IBM customers who needed lowers power mainframes, because, quite simply, not everyone needs a Ferrari. This was a profitable niche for 

us, and we quickly became a ‘‘go to’’ company for businesses that 

needed cost- effective mainframes. 

One of the reasons we got into this business was in 1999, IBM 

had stopped selling these smaller mainframes that we sold. With 

no competitors left in the field, they simply were able to scale down 

their larger systems, and charge what we felt were monopoly rents 

to these smaller users. Seeing this as an opportunity for our little 

company, we licensed a new technology from a company called 

8 

Platform Solutions, a California-based small business, whose product allows less expensive hardware to run IBM’s mainframe operating system. As a result, I could compete with IBM by selling 

much more affordable mainframe machines to my customers. 

Thanks to a well-known Department of Justice Consent Decree 

that lasted for decades, and it compelled IBM to license their mainframe operating system to all comers on reasonable and non-discriminatory terms. This is what permitted a small startup company 

like Amdahl to innovate and excel in the market in the 1980s and 

1990s. The continuation of this practice was a basic assumption in 

our decision to develop our products. 

However, in 2003, IBM was released from this Consent Decree. 

Almost immediately, they began putting up obstacles to T3 and our 

customers who wished to license this operating system. This culminated on October 31st, 2006, when IBM publicly announced they 

would no longer license their patented operating system to any 

hardware except their own. Imagine, if you will, if Microsoft one 

day announced that they were building their own PCs, and that 

Windows would only be sold on those machines. 

To make matters worse, they then sued my business partner and 

I for alleged intellectual property violations. The court process has 

taken three years, cost millions of dollars, and is still not over. To 

make matters worse, IBM has since purchased PSI and shelved its 

technology. And now, almost incredibly, in civil court, IBM hides 

behind Intellectual Property laws claiming that they permit otherwise forbidden monopolistic behavior, essentially saying that Intellectual Property laws trump Antitrust laws. 

Chairwoman VELA ́ ZQUEZ. Time is expired. Can you sum it up? 

Mr. FRIEDMAN. Yes. Absolutely. 

Chairwoman VELA ́ ZQUEZ. Because votes are happening right 

now. 

Mr. FRIEDMAN. Okay. Although I can afford no cure-alls, I do implore you to think beyond bumper sticker slogans, and think 

through the whole process, and the unintended consequences of 

these laws. And I thank you for your time, and look forward to answering any questions. 

[The prepared statement of Steven Friedman is included in the 

appendix.] 

Chairwoman VELA ́ ZQUEZ. Okay. The Committee will stand in recess until we finish voting on the House floor. Thank you. 

[Recess.] 

Chairwoman VELA ́ ZQUEZ. The Committee is called back to order. 

Sorry for the time that we spent on the House floor. 

It is my pleasure to introduce Mr. Peter Carnes, and he is not 

related to Mr. Rick Carnes. And he is the CEO of Traffax, Incorporated located in Silver Spring, Maryland. Traffax is a startup 

that measures traffic flows through the use of Bluetooth Wireless 

signal. Mr. Carnes is testifying on behalf of the Association for 

Competitive Technology, representing more than 3,000 technology 

firms. 

Welcome. 

9 

STATEMENT OF PETER CARNES 

Mr. PETER CARNES. Thank you. Chairwoman Vela ́zquez, Ranking 

Member Graves, and well, there were distinguished members of the 

Committee here before, but I’m sure that they’ll be able to review 

this by— 

Chairwoman VELA ́ ZQUEZ. They will be coming back. 

Mr. PETER CARNES. Right. So, my name is Peter Carnes. I’d like 

to thank you for holding this important hearing on the role that intellectual property plays in driving innovation and creating economic growth. And, most importantly, new jobs. 

I am the Chief Executive Office of Traffax, Inc., a transportation 

monitoring equipment startup in College Park, Maryland. Traffax 

was a May 2008 winner in the University of Maryland’s Maryland 

Technology Enterprise Institute business plan competition, and we, 

as you said, design equipment and systems to measure the flow of 

traffic, both pedestrian and vehicular traffic. We use a technology 

that detects and monitors electronic signals from end-use electronic 

devices. The technology is accurate, it’s inexpensive to deploy, and 

it operates while protecting people’s privacy, which is a significant 

improvement, and overcomes some disadvantages found in some 

existing technologies. 

While we are US-based, traffic is a global problem, and Traffax’ 

equipment is also currently being used in Canada, England, Australia, and Brazil. We’re many conversations with other European 

countries. We have a whopping seven employees, and we’ve managed to extend our reach of our equipment to these particular 

areas. And the way that we’ve been able to do that is, obviously, 

we’ve been able to attract good partners, but it’s the value of our 

idea, and the ability to solve an apparent problem that has really 

helped us expand beyond Maryland, and beyond the U.S., into 

other parts of the world. 

In today’s global world, innovation serves as the linchpin for creating future jobs, solutions to modern problems, and maintaining 

technological leadership. When I go to work everyday, I have a very 

unique opportunity. I have the opportunity to fail, and I do it over, 

and over, and over until I find a solution. Most people when they 

go to work, they need success, and they need it all the time, so they 

cannot push the envelope. In my job, I’m supposed to make sure 

things change. I’m supposed to focus on problems, and make sure 

that they get solved. And that’s a tremendous benefit, but it is a 

high-risk way to live your life. And the reason that that works is 

because that there is the potential for there to be high reward 

when you solve a real problem, and you find a creative solution. 

So, to do that, you’ve got to integrate IP culture into all stages 

of your innovation process to be able to protect the work that you 

do. So, you have to treat IP holistically within your business, you 

have to view it as copyright, trademark, relationships that you 

make, and, obviously, patent protections. You have to reward employees that help you create IP. 

So, we view IP as America’s way forward. And according to the 

2007 report by the Information Technology and Innovation Foundation, IT, Information Technology, adds $2 trillion annually to the 

U.S. economy, and is responsible for nearly all of the pickup in economic growth over the last decade. And when you look at the peoVerDate Aug 31 2005 19:41 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57519.TXT DARIEN
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ple’s day-to-day work, that translates to increases in productivity. 

That increase in productivity comes from IT. For IT to work, it requires its own fuel, which is intellectual property, or the right to 

benefit from your idea. 

There’s, essentially, three roadblocks that I identified for building IP culture, the time it takes the USPTO to process a patent, 

the uncertainty of IP protection in overseas markets, and the lack 

of funding options from banks and SBA for companies that create 

IP. Small technology companies like mine, we do not buy buildings, 

we do not buy furniture, we do not buy trucks, we often don’t even 

buy computers. We use our money to pay engineers, and software 

developers, and marketing people, and sales people to create a new 

idea, create a message, and get it out. And we have a very difficult 

time with funding unless we can point to IP as something that will 

help an investor value their return. 

So, we would like for you to do the work that you do, and we recognize that it’s quite difficult, but we believe that the USPTO 

needs some help, and they need to be able to use the money that 

they collect, that we pay them in fees, so we ask you to pass the 

USPTO budget request. We want you to continue to do what you 

can to help protect IP globally, both focusing on bad actors, but trying to achieve harmonization with our closer friends, as well. And 

then whatever work could be done to help the SBA recognize that 

all small businesses aren’t delis, they aren’t gas stations, some of 

them have the same kind of technology problems that IBM, and 

Google, and Apple, and eBay have. Thank you. 

[The prepared statement of Peter Carnes is included in the appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Carnes. 

The Chair recognizes the Ranking Member for the purposes of introducing our next witness. 

Mr. GRAVES. Thank you, Madam Chairwoman. 

Our next witness is Mr. William Mansfield. He’s the Director of 

Intellectual Property at ABRO Industries in South Bend, Indiana. 

ABRO Industries was founded in 1939, and currently manufactures 

and distributes industrial, automotive, and consumer products. Mr. 

Mansfield is testifying on behalf of the Motor & Equipment Manufacturers Association. Welcome. 

STATEMENT OF WILLIAM MANSFIELD 

Mr. MANSFIELD. Madam Chairwoman, Ranking Member Graves, 

and other distinguished members of the Small Business Committee, thank you for the opportunity to testify before you today on 

the impact of intellectual property on entrepreneurship and job creation. My name is William Mansfield, Director of Intellectual Property for ABRO Industries, Incorporated. 

I am here representing the Motor & Equipment Manufacturers 

Association and ABRO. The Motor & Equipment Manufacturers 

Association, or MEMA, represents nearly 700 companies that manufacture motor vehicle parts for use in the light vehicle and heavyduty original equipment, and after-market industries. Motor vehicle parts suppliers are the nation’s largest manufacturing sector, 

11 

directly employing over 685,000 U.S. workers, and contributing to 

over 3.2 million jobs across the country. 

ABRO Industries Incorporated is a small after-market supplier 

headquartered in South Bend, Indiana. Now, if you never heard of 

ABRO Industries before, do not feel bad. Virtually, no American 

has. ABRO operates in a manner once common in America, but 

which is now almost unheard of. ABRO has a variety of automotive 

hardware and basic consumer goods, such as radiator fluid, glues, 

and masking tape, manufactured in America under the ABRO 

brand name. 

We sell those items exclusively overseas, mostly in developing 

nations. We do not sell any items in the United States. We have 

spent decades building the ABRO brand name into a reliable identifier of high-quality goods. ABRO greatly values its name, which 

is registered in multiple categories in over 160 nations. 

Because ABRO faces counterfeiters all around the world, I run 

ABRO’s very aggressive Anti-Counterfeiting program, and I fought 

counterfeiters on six continents. And I’m always looking for a case 

in Antarctica, as well, on ABRO’s behalf. 

The magnitude of global counterfeiting is significant. International IP protection is about much more than Hollywood, or luxury goods, though both will always be an important component of 

the battle. IP protection is also about safety of a wide variety of 

consumer products, such as pharmaceuticals, and motor vehicle 

parts. 

Counterfeit parts and components for motor vehicles pose a critical problem to the American economy, and the supplier industry. 

MEMA conservatively estimates that counterfeit goods cost motor 

vehicle suppliers at least $3 billion in the United States, and $12 

billion globally in lost sales. And while protecting intellectual property is important for major multinational corporations, I would 

argue that IP is extremely critical for small businesses like ABRO, 

which has only 24 employees, because a single incident could force 

a company out of business. A giant corporation can recover from a 

hit to its reputation, a small company does not have this ability. 

If counterfeiters have managed to undermine their brand name by 

selling low-quality and/or defective products under that name, they 

can easily be permanently damaged, or even destroyed. 

Now, it is common to blame all counterfeiting on China, and this 

is, of course, not the case. Counterfeits are also made in India, Russia, and other countries. We at ABRO have been able to work with 

the Chinese government in enforcing our intellectual property, and 

they have pursued counterfeiters when our company presented 

credible evidence of our trademark being violated. 

There’s a wide range of counterfeit parts and components for vehicles that are manufactured and distributed globally, which may 

result in catastrophic vehicle systems malfunctions, endangering 

the car or heavy-duty truck driver operating the vehicle, and all 

motorists traveling the same road. 

Trademark or brand infringement is the most immediate problem faced by many motor vehicle suppliers. Pirates also copy trade 

dress or the unique appearance of product packaging. Often they 

do not make perfect copies, instead making the packaging confusingly similar. To demonstrate, I have three cans of spray paint, a 

12 

genuine ABRO product, and products labeled AMBRO and ARVO. 

This example shows how hard it can be for the average consumer 

to distinguish between an authentic and a counterfeit good. 

MEMA supports the recent Intellectual Property Enforcement 

Coordinator’s Joint Strategic Plan, which is the first ever plan to 

include a roadmap on how to address challenges of counterfeiting, 

and piracy of American IP. Additional resources are necessary to 

fully implement the plan, which will improve our nation’s ability to 

combat counterfeiting and piracy. 

Our country must promote and defend a robust international system of IP laws and norms, while strengthening cooperation with 

like- minded countries, and key trading partners to promote shared 

IP protection. Congress should authorize additional resources for 

CBP and ICE to enforce intellectual property laws at our borders, 

and support comprehensive robust anti- counterfeiting trade agreements. 

Finally, Congress should consider expanding the IP Attache program. These contacts have generally assisted my company in understanding local anti-counterfeiting procedures, gaining access to 

key foreign government personnel, and obtaining the necessary resources to fight counterfeiting in other nations. 

Madam Chairwoman, thank you again for the opportunity to testify today. 

[The prepared statement of William Mansfield is included in the 

appendix.] 

Chairwoman VELA ́ ZQUEZ. Thank you, Mr. Mansfield. 

If I may, I would like to address my first question to Mr. 

Holleyman. 

Two years ago, your Association released a study on the impact 

of piracy. Can you tell the Committee since that study was released, how effective your industry has been in addressing the 

problem of piracy in software industry? And how does this issue 

post obstacle for small firms? 

Mr. HOLLEYMAN. Thank you for that question. Each year we 

work with ITC, which is one of the leading technology research 

firms to try to quantify the impact of piracy, not just on U.S. companies, or not just on our members, but globally. 

Over the past two years, we’ve seen two trends happen. One is 

that the overall global rates as a percentage of piracy are going up, 

and that is because large markets like China, Brazil, the BRIC 

markets, who have higher rates of piracy on average than the global average, they’re becoming so important in terms of sales of PCs, 

that the sales of legal software are lagging behind, that they’re 

driving overall global rates up. 

At the same time, because of the progress in many countries, and 

also, candidly, because of the economic environment last year, the 

dollar loss due to piracy has stayed sort of roughly the same over 

the last couple of years. But it’s about $51 billion a year lost due 

to piracy, and when I’m sort of challenged, how could that possibly 

be the case? Well, that’s the commercial value of pirated software 

estimated to have been put into use. And if you look at the fact 

that the packaged software industry is a $300 billion a year indusVerDate Aug 31 2005 19:41 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57519.TXT DARIEN
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try, it’s not a surprise to see that there could be as much as $51 

billion in pirated value with the marketplace. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Friedman, I recognize that litigation can have a crippling effect on small businesses. It also creates the prospect of unknown 

costs. How are your business decisions, including those on R&D 

spending and hiring impacted by this uncertainty? 

Mr. FRIEDMAN. Certainly, what has happened to us in the last 

few years has put us on guard to be a little more wary than we 

might ordinarily have been in terms of our hiring and our R&D. 

We are also, however, extremely aware and cognizant of the importance of IP, especially in the technology field. And for a small company, as others here today have testified, it’s a critical path to success to gain that intellectual property. 

Our issue with it really is only how larger companies utilize IP 

to the detriment of smaller companies. But for ourselves, we feel 

it’s a critical component to future success for small companies. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Carnes, the music industry supports thousands of small 

businesses, from production-related activities. These includes firms 

ranging from marketing, to video production, to small recording 

studios. Can you discuss the direct and indirect effects of piracy on 

the industries that you deal with? 

Mr. RICK CARNES. Well, as a songwriter, in my testimony I said 

all I produce is copyright. That’s the only thing that I get paid on. 

But that copyright, like that hit song, is the thing that drives the 

entire business. I mean, if you get a hit song, you run into the studio and you demo it. Well, you immediately give jobs to studio musicians, to recording engineers, to the studio owners who are small 

business people. And then it goes to the record label. If they decide 

to record it, then they rerecord it. They make a master recording, 

so now you have more studio musicians, you have bigger recording 

studios. The budgets continue to increase. And then once it gets to 

the radio, then you have all the marketing people that go out and 

market the record. And then, of course, you have all the retail people that sell the record. And it continues up the chain. Then you 

have the advertising people that use the song for the purpose of 

selling other goods. And every one of these things adds—the value 

is all added on top of one copyright. 

Absent that hit song, that whole process, it all starts with a song. 

Absent the song, it stops right there. If you don’t have a hit song, 

that’s it. 

Chairwoman VELA ́ ZQUEZ. Thanks. 

Mr. Peter Carnes, the process of managing and protecting one’s 

trademarks, patent rights, or copyrights can be very complex. And, 

in many cases, small firms do not know where to start, and maybe 

end up taking no action. So, can you talk to us about what 

proactive measures should a small business take to manage their 

intellectual property rights? 

Mr. PETER CARNES. Yes, ma’am. Thank you. 

First of all, I’d like to say that the USPTO actually does a very 

good job with regard to outreach, and trying to explain their process. It’s not their job to tell you about the importance of IP, but 

14 

it is their job to explain to you how their process works. And I do 

think that they generally do a good job trying to do that. 

I think that if you’re in the technology business, you have some 

sense of make it once, and sell it many times. And once you overcome that original hurdle of an idea, then, typically, what happens 

is that you set aside some of your funding to engage with an attorney that practices Intellectual Property law. And often your investors will require you to do that. 

So, I think that that system is actually pretty well, works pretty 

well as far as information goes. I think the problems with IP are 

not the information about how that it works, but the understanding of the timeliness and the effort that it will take. 

One area that is a big issue, though, is your patent, if you are 

issued a patent in the U.S., it protects you in the U.S., so you must 

go out and seek protection in every market that you think is relevant to your technology. So, anything that could happen to help 

with harmonization would help you, especially as a small business, 

to only have to learn kind of the rules, the general rules instead 

of learning the specific rules for each place. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Mansfield, you mentioned in your testimony that ABRO, that 

most Americans haven’t heard about ABRO, because you don’t sell 

any of the items here. Why is that? 

Mr. MANSFIELD. Well, first, Madam Chairwoman, I’d like to echo 

Mr. Carnes’ comment. I think the USPTO does an amazing job in 

outreach. 

Chairwoman VELA ́ ZQUEZ. That’s good to hear. 

Mr. MANSFIELD. And they’re often not recognized for that, but 

they do very good work there. 

ABRO’s history has been about selling where ‘‘Made in America’’ 

has a strong competitive advantage. And in developing nations 

around the world, ‘‘Made in America’’ really means something, no 

matter if they’re angry at us, they’re mad at us, our political structure, anything, they trust our products, especially non-electronic 

consumer goods. So, we have just built up in a small niche where 

‘‘Made in America’’ can really have an impact, especially after 30 

years of consistently providing American-level quality non-electronic consumer goods. 

Chairwoman VELA ́ ZQUEZ. Okay. And just since you sell your 

products overseas, can you tell us what obstacles do you face when 

you do business in countries with limited protections of IP? 

Mr. MANSFIELD. It certainly is true that the counterfeiters target 

countries where the protections are hard to get, or hard to enforce. 

They’re pretty much any country now, especially with the Madrid 

Protocol, you can get trademarks, you can get the registration. But 

that is not the end of the fight, that’s just the beginning. 

In most countries, especially developing countries, you have to 

invest significantly and work to make sure your brand is protected 

there. In my work, I spend about 100 days a year on the road internationally physically going to the countries, meeting the key people, and learning what works there. And too often, Western brand 

owners assume that what works here, will work everywhere. 

There’s always a way to protect intellectual property in every counVerDate Aug 31 2005 19:41 Nov 12, 2010 Jkt 000000 PO 00000 Frm 00020 Fmt 6633 Sfmt 6633 G:\CLERKS~1\HEARINGS\TRANSC~1\57519.TXT DARIEN
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try. It’s just not always our way. And you have to spend the time 

to learn the local way. 

Chairwoman VELA ́ ZQUEZ. Thank you. 

Mr. Graves. 

Mr. GRAVES. Thank you, Madam Chair. 

My question is for each of you, and it’s about trade agreements. 

And my curiosity is, when it comes to enforcement of intellectual 

property rights, how do—the trade agreements, at least the ones 

that we’ve passed recently, do they the protections you need? Do 

they go far enough? Just, in general, just I’d be very curious about 

that. Mr. Holleyman. 

Mr. HOLLEYMAN. Sure, I’ll start. I think that the trade agreements have been a huge factor behind the growth of the software 

industry, both the multilateral ones by WTO, including Intellectual 

Property provisions, but many of the Free Trade agreements have 

been quite specific in recent years in addressing the issue of software, insuring that governments were using only legal software, 

and trying to take steps to drive private sector use. So, they’re important, and we think that IP components need to be a part of 

every trade agreement. 

Mr. GRAVES. Mr. Carnes. 

Mr. RICK CARNES. Well, certainly, when we harmonize treaties, 

like WIPO, and things like that, that helps, because you get—when 

you have some countries that have limited copyright protection, 

and other countries like the United States now has Life Plus 70, 

gets to be a problem, so it has positively impacted us, that we’re 

harmonizing some of the laws. 

Mr. GRAVES. Mr. Friedman. 

Mr. FRIEDMAN. I will admit that I am not very well versed in the 

trade agreements. I can say that, historically, about one-third of 

our business has been overseas, primarily in Europe. The only restriction that we had was in our early days shipping some technology, or not shipping some technology to the former Soviet Union 

into Russia. So, I’m sorry, but I can’t be too much help on this 

question, I don’t think. 

Mr. GRAVES. Mr. Carnes. 

Mr. PETER CARNES. Yes, thank you. I, in general, feel very positive about the trade agreements, and the progress that has been 

made in that area. And I think that as a government, you tend to 

think about it at a macro level. As an individual, I tend to think 

about it as a micro level. And at the micro level, what I see happening in some of these countries is that the protection of IP is entering into the narrative. And I think in many parts of the world, 

and I’ve had the opportunity to visit China about 25 times, and I 

think that part of what we need to do is continue to focus on these 

things at the macro level to make sure that it enters into individual narrative, because in some parts of the world, I think their 

view of your rights around intellectual property are just fundamentally different than the U.S. right. So, I think that the focus of our 

government on these issues encourages discussion down at the 

working level. Thank you. 

Mr. GRAVES. Mr. Mansfield. 

16 

Mr. MANSFIELD. I would once again agree with Mr. Carnes, who 

I’ve never met before today, but, apparently, we’re very much in 

agreement. 

I think the more America is involved with other countries in 

these trade agreements, the better Americans are able to function 

in those structures, and the more respect is given to intellectual 

property rights. 

I would love to take this as a chance to, again—the IP Attache 

program, which currently exists, I think we have eight of them in 

our embassies, if that was expanded, I think we would have better 

protection, especially better protection for small businesses, who 

could then call upon that person as a local expert in the structure 

that they are now dealing with. 

Mr. GRAVES. Thank you, Madam Chair. 

Mr. LUETKEMEYER. Thank you, gentlemen, for being here today. 

I’ve got a couple of questions with regards to—I was talking with 

one of my Small Business people last week, and he was kind of 

frustrated with the process, to the point where he said—I asked 

him if he had his process patent, and he said, ‘‘No.’’ He said, ‘‘One 

of the things that concerns me is the fact when you put the patent 

out there, it allows everybody to see what you just did, and all they 

have to do is tweak it just a little bit, so that they can go out and 

have their own patent on your own product.’’ 

Do you see something like that as a problem with your own particular areas of interest, any of you? 

Mr. PETER CARNES. Yes. Obviously, that is a consideration that 

everybody has. Essentially, the patent process, you have—after 18 

months, your patent is published at some point, and people can 

read it. And I think that you have to think about from the perspective of what is the patent system about. It is really about trying 

to drive innovation. So, if people are able to read your patent, and 

develop a significant leap forward, then the world needs that leap 

forward. 

The big issue is whether people can just read your patent, and 

go out and copy your work. And the truth is, the time between 

when the patent is published, and when the patent is released, 

during that time you cannot do anything to discourage a potential 

competitor. 

It used to be the time that you had published your patent, and 

your patent was issued was the time that you established your 

market leadership. And you traveled down the learning curve to 

get better at your technology before somebody else did. And right 

now, with the huge gap of time between when the patent is published, and when they’re issued, you don’t have that time to earn 

that market leadership anymore. 

Mr. MANSFIELD. I’d also like to comment, if I could, sir. 

Mr. LUETKEMEYER. Yes. 

Mr. MANSFIELD. They have another option. Trade secrets exist 

specifically for that sort of concern. Coca Cola never published or 

patented its recipe, and it jealously guarded it, kept it secret, and 

it hasn’t been duplicated. But going public is kind of part of the 

tradeoff of getting the protected period under a patent system. 

17 

Mr. LUETKEMEYER. Do you believe that existing laws are enforced adequately, both here in this country, and abroad, or are 

there problems in one place, or the other? 

Mr. MANSFIELD. ABRO doesn’t actually have any patents. I’m 

justMr. LUETKEMEYER. Intellectual property either way. 

Mr. MANSFIELD. I think it is getting better. It’s far from perfect, 

but more and more there are tools that you can work with to protect your own intellectual property. So, by and large, I think we’re 

improving yearly. 

Mr. HOLLEYMAN. Congressman, I’ll add to that. I certainly took 

heart from Mr. Mansfield’s comments about the progress that his 

company has been making in markets like China. I have been 

working intellectual property issues there for almost two decades, 

and I do think that there is a level of understanding that, ultimately, intellectual property protection will be important to China. 

I think it’s a question of when, and where will that be exercised. 

We work very closely with the Copyright Office in China, and their 

enforcement authorities, who are, by all accounts in my meetings, 

very diligent, hardworking, committed public citizens. But there 

are less than 20 people at the Central government in China working on copyright protection industries, and trademark industries 

for the whole of China. So, it’s not a question of the ability or interest of certain people to do their jobs, but it’s a question of a priority 

that’s been placed. 

So, in our case, where we have digital piracy largely within businesses, including state-owned enterprises, finding an effective remedy for enforcement, we’re still a long way from that. And there are 

many other countries like that. 

Mr. LUETKEMEYER. Okay, very quickly, my time is about to run 

out. I’ve got one question I would like each of you to answer very 

quickly, if you would. 

With regards to, this is the Small Business Committee, and we’re 

always interested in small business folks. Are the laws that deal 

with intellectual property, are they too cumbersome for our small 

businesses to work through, are they about right, do they need to 

be—are they too easy, they need to be enforced, or more layers 

need to be in it to help protection, or are we where we need to be, 

if you wouldn’t mind each one commenting on that. 

Mr. FRIEDMAN. If I may, thank you. 

From our perspective, I think the laws are adequate, but in some 

cases lack clarity, in the case that—in our story that I talked about 

earlier. The nexus where intellectual property and antitrust meet, 

for example, there’s lacking a lot of clarity of what has precedence 

in the case that I talked about this morning. And the situation of 

unintended consequences, where it actually enabled the monopolist 

to act in violation, we think, of antitrust laws. And, today, that 

company now has 100 percent market share in our marketplace. 

Mr. HOLLEYMAN. I’ll start by saying that for software companies, 

of which 97 percent of the firms in software in this country are 

small businesses, and globally, 60 cents of every dollar that’s spent 

on software around the world comes back to a US-based company. 

I’m often asked when I travel what’s the secret? Why does that 

happen? Why has the U.S. been so successful? And it’s really—it’s 

18 

part three things. One, sort of a culture of entrepreneurship, and 

risk-taking. Two, a good educational system, but it’s no surprise 

that because we’ve had very strong intellectual property laws in 

this country, that is really what’s allowed us to build a market 

here, and expand it internationally. And, to me, that is the secret 

sauce that’s missing in most other countries. So, I think it works 

well for small business. 

Mr. RICK CARNES. As a songwriter, I can say that in terms of 

interdicting physical counterfeited goods, pirated CDs and hard 

version, the government has done some good, with the CHIP program, with the FBI, the Intellectual Property Law Enforcement 

Commission, they’re actually discussing this. But, by and large, the 

government has ignored the 800-pound gorilla in the room, which 

is intellectual property, songs being stolen on the Internet. 

As an individual songwriter, there’s no way in the world I can 

enforce my copyrights on line. I have to take literally hundreds of 

thousands of infringers into Federal Court, and reduce the case to 

a court of last resort, probably a quarter of a million dollars per 

every case. How can I possibly do that, when the people that are 

stealing my music are, by and large, 14 and 15-year old kids, who 

really, probably, stole it because they don’t have a credit card. So, 

what do I do? 

I mean, if the government doesn’t actually come in and help enforce the copyright laws on the Internet, then what we need is to 

have the government help us with technological solutions that will 

keep the piracy from happening in the first place. 

Mr. LUETKEMEYER. Very good. Thank you. Thank you, Madam 

Chair. 

Chairwoman VELA ́ ZQUEZ. So, Mr. Carnes, do you believe that 

there is a way to support new distribution methods, while insuring 

financial compensation to right holders? 

Mr. RICK CARNES. I do think that there is a way. What we need 

to do is make sure that we allow for the development of premium 

content delivery networks, sort of, for lack of a better—it’s a place 

where you can—like the Kindle from Amazon, you’ve got a side 

channel, you can just punch a button, bam, 60 seconds, you get the 

book that you want, smooth, easy transaction. 

What we need are content delivery networks where you can get 

stutter-free movies, and high definition, fast, perfectly delivered 

copies. The only trouble is that that has run afoul of the Fifth Rule 

of Neutrality, which says that you can’t discriminate on data on the 

Internet. Well, this is actually—I’m being discriminated against 

when you say that I can’t take my content, and partner with an 

ISP to deliver premium content that’s faster and better. So, I have 

a problem with the Fifth Rule of Network Neutrality, because of 

that. 

If we could set up those delivery channels, that would help us 

give the consumer a better experience than they get on peer-to-peer 

file sharing. 

Chairwoman VELA ́ ZQUEZ. Mr. Holleyman, I know your organization has been supportive of the draft Anti-Counterfeiting Trade 

Agreement, so can you talk to us about what implications does this 

draft agreement have for small software companies? 

Mr. HOLLEYMAN. Sure, thank you. 

19 

We have supported this agreement. There have— 

chairwoman VELA ́ ZQUEZ. Especially for those small companies 

looking to enter the foreign market. 

Mr. HOLLEYMAN. Sure. At the heart of this proposed agreement, 

and it’s still in negotiation, so we haven’t seen what would be a 

final text, it would, one, not require any changes to U.S. law. And 

we have strong, effective intellectual property laws, not perfect, but 

they can be improved in enforcement, but strong laws. This calls 

upon our trading partners to increase their standards of protections 

in ways that will provide, like the U.S., effective tools against counterfeiting and piracy. So, we believe for small software companies, 

for whom there’s a huge opportunity in foreign markets where piracy rates tend to be higher than in the U.S., that this agreement 

has the potential to really make progress in fighting piracy. Again, 

it’s not final, but we’re encouraged by what we’ve seen today. 

Chairwoman VELA ́ ZQUEZ. Do you see any will and desire from 

foreign countries to support this type of agreement? What will be 

the kind of benefit for them? 

Mr. HOLLEYMAN. Well, I’ll say two things. One, I’m encouraged 

by the fact that this agreement was initiated in the Bush Administration, reviewed very carefully by the Obama Administration before they took it on, so I view it as a distinct sort of across party 

lines, a real win-win for the U.S. There are a couple of key trading 

partners working on this together. 

I mean, I think, ultimately, the test will be how many other 

countries when it’s final can we get to join it? I mean, the verdict 

is still out on that. Again, the agreement is not final, but the intent, and the fact that it’s shared across two administrations now 

is very important. 

Chairwoman VELA ́ ZQUEZ. Okay. Well, let me take this opportunity to thank all the witnesses. And we will continue to ask the 

Small Business Committees charged with making sure that the law 

of unintended consequences are not there when it comes to legislation that will impact small businesses, we will continue to monitor 

this issue. And I want to take this opportunity, again, to thank you 

for being here today. 

I ask unanimous consent that members will have five days to 

submit a statement and supporting material for this record. Without objection, so ordered. This hearing is now adjourned. Thank 

you. 

[Whereupon, at 3:06 p.m., the Committee was adjourned.] 

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Æ