Fighting Movie Piracy Seen Likely to Swamp U.S. Trade Agency

A proposal, released last week by a group of U.S. lawmakers, would give the International Trade Commission, rather than federal courts, the lead role in deciding complaints spanning illegally streamed video to counterfeit watches sold over the Internet. Photo: Caroline Ventezou/AFP/Getty Images Close

A proposal, released last week by a group of U.S. lawmakers, would give the... Read More

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A proposal, released last week by a group of U.S. lawmakers, would give the International Trade Commission, rather than federal courts, the lead role in deciding complaints spanning illegally streamed video to counterfeit watches sold over the Internet. Photo: Caroline Ventezou/AFP/Getty Images

A U.S. trade agency called on to fight Internet piracy under a proposal circulating in Congress may lack the money and staff needed to do the job.

The draft plan, released last week by 10 lawmakers from both parties, would give the International Trade Commission new powers against foreign websites accused of trafficking in pirated content and counterfeit goods. The agency, created to shield U.S. markets from unfair trade practices, doesn’t have the resources for those added responsibilities, according to lawyers who handle cases before the commission.

“The ITC cannot add many more proceedings to its already crowded docket,” Smith Brittingham, a lawyer with Finnegan Henderson in Washington, said in an interview. “They’ve been doing some studies on digital rights, but it is not the bread and butter of the ITC’s current group of professionals.”

The proposal has emerged as an alternative to House and Senate bills backed by Hollywood studios and the recording industry, which seek a crackdown on online theft of movies and music. Google Inc. (GOOG) and Facebook Inc. said in a Nov. 15 letter that those measures would create “new uncertain liabilities” for Internet companies and threaten the growth of the technology industry.

Under the House and Senate bills, introduced earlier this year, the Justice Department would be allowed to seek court orders requiring Internet-service providers, search engines, payment processors and ad networks to block or cease business with foreign websites linked to piracy.

Counterfeit Merchandise

The alternative proposal, which hasn’t been introduced as a bill, would let U.S. intellectual-property holders petition the commission to investigate foreign websites linked to piracy. The agency could issue cease-and-desist orders against sites that “primarily” and “willfully” engage in copyright infringement or enable imports of counterfeit merchandise, according to the proposal.

The commission has the power to block imports of products found to infringe intellectual-property rights. It can also propose tariffs to counter subsidized imports, and it investigates trade-related issues for Congress and the president.

Under the draft plan, cease-and-desist orders from the agency against non-U.S. websites could be used to force domestically based payment processors and Internet advertising networks to stop providing services to such websites.

The proposal is backed by lawmakers including Senator Ron Wyden, an Oregon Democrat who has threatened to block the previously introduced Senate version, and Representative Darrell Issa, a California Republican.

New Judges

The proposal would add more work to an agency that is at the center of patent battles over smartphone technology and is investigating allegations of unfair trade practices by China in the solar-panel industry. The commission, which has six administrative law judges, had about 350 workers and a budget of $84.8 million in fiscal 2011, according to its financial report.

To handle the duties envisioned by Wyden and Issa, the agency would need at least two new administrative law judges and support staff, as well as hearing rooms, said Paul Devinsky, a patent lawyer with McDermott Will & Emery in Washington. It also might have to expand its Office of Unfair Import Investigations, which acts as a third party on behalf of the public in some patent cases.

“You’re not going to see too many of these foreign websites show up with lawyers,” Devinsky said. “Someone’s going to have to stand up for the public interest to make sure there’s no overreaching.”

‘Useful Tool’

The Wyden-Issa draft proposal doesn’t address whether the agency would receive additional funding for the new anti-piracy role. Peg O’Laughlin, a commission spokeswoman, said the agency had no comment on their proposal.

NetCoalition, a technology-industry group whose members include Google, Yahoo Inc. (YHOO) and EBay Inc. (EBAY), supports having the trade commission handle copyright and trademark infringement cases against foreign websites, Markham Erickson, the group’s executive director, said in an interview.

“The ITC is a very useful tool in the efforts to crack down on sites that are currently outside the jurisdiction of U.S. courts,” said Erickson, whose Washington-based group includes Bloomberg LP, the parent company of Bloomberg News. “That’s what ITC was designed to do.”

Google, which owns the world’s biggest Internet search engine, is waiting to see the language in a future bill, Samantha Smith, a company spokeswoman said, declining to comment further. Andrew Noyes, a spokesman for Facebook, which operates the world’s largest social network, didn’t immediately comment.

‘Impractical’ for Artists

The latest proposal is “impractical for individual artists and creators,” Sandra Aistars, executive director of the Copyright Alliance, said in an e-mail. “They would have to travel to Washington, hire an attorney specifically admitted to practice before the ITC, and participate in a process that takes on average 18 months to complete.”

The Washington-based alliance, whose members include Comcast Corp. (CMCSA)’s NBC Universal, Time Warner Inc. (TWX) and Viacom Inc., supports the current House and Senate versions of anti-piracy legislation.

Representative Lamar Smith, a Texas Republican and chairman of the House Judiciary Committee, has said he plans a committee vote before year-end on his version of the measure, which he introduced in October. The legislation has more than two dozen co-sponsors from both parties. His spokeswoman, Kim Smith Hicks, declined to comment before the proposal from Wyden and Issa is introduced as legislation.

Music Industry

The Recording Industry Association of America is awaiting more information on the proposal, Cara Duckworth Weiblinger, a spokeswoman, said in an e-mail. The Washington-based group’s members include Warner Music Group Corp., Sony Corp. (6758)’s Sony Music Entertainment and Vivendi SA (VIV)’s Universal Music Group.

Some parts of the proposal “might have value” and should be offered as part of existing legislation “rather than starting from scratch with a brand new bill in a different committee’s jurisdiction that will take years to process,” Duckworth said.

Howard Gantman, a spokesman for the Motion Picture Association of America, declined to comment on the new proposal. The Washington-based group has supported the current House and Senate versions of the legislation.

Lyle Vander Schaaf, a patent lawyer with Brinks Hofer in Washington who specializes in trade agency cases, said the commission is better equipped to handle such complaints than courts because of its efficiency and authority to police imports, including electronic transmissions.

“I don’t think the cases will be so voluminous that they expand beyond their capacity,” Vander Schaaf said in an interview. “As long as they increase the budget, the commission will find a way.”

The Senate bill is S. 968, and the House bill is H.R. 3261.

To contact the reporter on this story: Eric Engleman in Washington at eengleman1@bloomberg.net

To contact the editor responsible for this story: Michael Shepard at mshepard7@bloomberg.net

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