[ncdnhc-discuss] Latest NC draft

[James Love]

> James,

> too far fetched. Let's focus more closely on realistic scenarios.
>
> Anyway in your description, what structures would ICANN need to make
> sure it receives and refuses such a call? Who should provide the
> counterpoint to such a call?
>
> Alejandro Pisanty


    Alejandro, I don't think this is far feteched at all, and indeed, many
think the copyright or other IP issues (e-commerce patents, sui generis
database rights, etc), are far more important than the trademark disputes.
I think ICANN did a pretty good job on the UDRP.  It isn't perfect, but it
isn't bad either, and I think an organization that controls domain names
can reasonably be asked to address trademark concerns.  So I'm ok on that.
However, I don't think ICANN should get into the other IPR issues.  In
Washington this week there is enormous attention to the digital copyright
issues.  There will be two days of hearings organized by the USPTO at end
of the week, and Congress is active too.  If you really want a taste how
how this is being played out, read Jack Valenti's April 23 testimony,
below, and then tell me how far fetched this is.   Jamie

Subject: FC: Valenti to Congress: "350,000 movies pirated online every
day!"   View Full Header
View Printable Version
From: Declan McCullagh <declan at well.com>
Date: Tue, April 23, 2002 9:05 pm
To: politech at politechbot.com
Priority:  Normal


MPAA sent along two Microsoft Word files, which I posted. If you
(sensibly) prefer HTML, that version is up on their site.

Press release:
http://www.politechbot.com/docs/valenti.movies.release.042302.doc
http://www.mpaa.org/jack/2002/2002_04_23a.htm

Jack Valenti's testimony itself (included below in text form):
http://www.politechbot.com/docs/valenti.movies.testimony.042302.doc
http://www.mpaa.org/jack/2002/2002_04_23b.htm

-Declan

---

   A CLEAR PRESENT AND FUTURE DANGER: The potential undoing of Americas
   greatest export trade prize
   An Accounting of Movie Thievery in the Analog and Digital Format, in
   the U.S. and Around the World, Offered to the House Appropriations
   Committee, Subcommittee on Commerce, Justice, State, the Judiciary,
   and Related Agencies, by Jack Valenti, Chairman & Chief Executive
   Officer, THE MOTION PICTURE ASSOCIATION, in Ashburn, Virginia

   This text of my testimony is titled "A Present and Future Danger, the
   potential undoing of Americas greatest export trade prize." And for
   good reason. Which is why it is entirely suitable and necessary that
   the Appropriations Committee illuminate and seriously examine the
   impact of any erosion of the worth of the Copyright Industries
   (consisting of movies, TV programs, home videos, books, music, video
   games and computer software) on the economy of this country.

               The Economic Worth of the Copyright Industries

   The facts are these: The Copyright Industries are responsible for some
   five percent of the GDP of the nation. They gather in more
   international revenues than automobiles and auto parts, more than
   aircraft, more than agriculture. They are creating NEW jobs at three
   times the rate of the rest of the economy. The movie industry alone
   has a Surplus
   balance of trade with every single country in the world. No other
   American enterprise can make that statement. And all this at a time
   when the U.S. is bleeding from some $400 Billion in Deficit balance of
   trade.

                      The Peril Now and in the Future

   Brooding over the global reach of the American movie and its
   persistent success in attracting consumers of every creed, culture and
   country is thievery, the theft of our movies in both the analog and
   digital formats.

   Let me explain. Videocassettes, the kind we all use and enjoy, are in
   the analog format. Worldwide, the U.S. movie industry suffers revenue
   losses of more than $3 billion annually through the theft of
   videocassettes. That is a most conservative estimate. We are everyday
   vigilant in combating this analog thievery because, like virtue, we
   are everyday besieged. We are trying to restrain this pilfering so
   that its growth does not continue to rise to intolerable levels.

   But it is digital piracy that gives movie producers multiple Maalox
   moments. It is digital thievery, which can disfigure and shred the
   future of American films. What we must understand is that digital is
   to analog as lightning is to the lightning bug. In analog, the pirate
   must be provisioned with equipment, dozens, even hundreds of
   slave-video recorders, because after repeated copying in analog on one
   machine, the finished product becomes increasingly un-watchable. Not
   so in digital format. The 1,000th digital copy is as pure and pristine
   as the original. The copy never wears out. It is that durability which
   provides the DVD (Digital Versatile Disc) with its grandest asset and
   at the same time provokes such anxiety within the movie industry
   because copying retains its high resolution.

   Then there is the mysterious magic of being able, with a simple click
   of a mouse, to send a full-length movie hurtling with the speed of
   light (186,000 miles per second) to any part of this wracked and weary
   old planet. It is that uncomprehending fact of digital life that
   disturbs the sleep of the entire U.S. film industry.

   Movies have, until recently, been sheltered from the incessant
   pilfering visited on the music industry. Music on the Net has no
   graphics and can be brought down with normal computer modems since
   most songs are no more than three or four minutes. Not so with movies
   chock full of full-motion graphics. With a normal 56K computer modem,
   it could take between 12 to 24 hours to bring down a two-hour movie.
   Or to put it another way, one movie takes up the same space on a hard
   drive as do 150 or more songs. The buffer that has slowed a
   wide-spreading assault on movies in digital form is the languor with
   which American computer-homes have valued broadband access. With
   broadband access, a two-hour movie can be taken down, depending on the
   speed of the DSL line or cable modem, in 20 to 40 minutes. (But the
   next generation Internet will be able to download a two-hour movie in
   some 45 seconds!) Only some 9.5 million American computer homes have
   current high-speed, large pipe connections to the Internet. But that
   interim distance will gradually evaporate as broadband grows, both in
   its speed-power and in the deployment of broadband to homes. Once that
   happens all barriers to high-speed takedowns of movies will collapse.
   The avalanche will have begun. It is the certainty of that scenario
   which concerns every movie maker and distributor in the land.

   We are also besieged by a relatively new threat called Optical Disc
   Piracy. This new thievery design first reared its fraudulent head in
   China with VCD (Video Compact Disc), a cousin to DVD though its
   quality is inferior to DVD but cheaper to reproduce on machines that
   are far less costly than those that play DVD only. China, in response
   to our entreaties, has cracked down on pirates, forcing them
   off-shore. The huge problem in China at this writing is the street
   vendor malady. We are working with the Chinese government to shrink
   this problem. Meanwhile, mostly in Asia organized thieves are busily
   involved in stealing our movies, reproducing them in high-quality
   digital format and distributing them everywhere. In 2001, the MPAs
   Anti-Piracy forces conducted 74 raids against facilities in China,
   Hong Kong, Indonesia, Malaysia, the Philippines, Taiwan and Thailand,
   happily engaged in manufacturing illegal copies of both VCD and DVD.
   Happily, that is, until our Anti-Piracy people, along with local law
   enforcement officers, moved in for the raid. In some cases arrests
   were made and in some case equipment confiscated. But not in all,
   because of porous attention by authorities in some countries to really
   crack down hard on these pirates. It is an ongoing problem for us.

   More ominously, just recently, with the sturdy aid of the FBI, a
   factory was raided in New Jersey which was illegally reproducing DVDs.
   This was the first time we have located a U.S. site dealing in
   illegitimate DVDs. But it wont be the last.

   I report quite joyously that we are receiving first class assistance
   form the FBI, the U.S. Secret Service, the Department of Justice, U.S.
   Customs Service as well as local U.S. Attorneys offices. I will come
   back to this shortly as I know this is of keen interest to the
   Subcommittee.

    Comes Now the Internet, Future New Delivery System, but Now a Piracy
                                   Haven

   As I said just a few minutes ago, it is the Internet, that
   all-embracing technological marvel, which is putting to hazard our
   attempts to protect precious creative property. Viant, a Boston-based
   consulting firm, has estimated that some 350,000+ movies are being
   downloaded from the Internet every day all of them illegal.

   We are deploying our defenses on three fronts.

                              The First Front

   Protecting copyright in the courts. We have to insist that copyright
   laws cannot be casually regarded, for if those laws are shrunk or
   loosened, the entire fabric of costly creative works is in deep
   trouble. We have moved swiftly and decisively against all those Web
   sites and other services that harbor and inspire the theft of movies.
   We brought one of the first cases under the Digital Millennium
   Copyright Act to halt the distribution of DVD hacking software on the
   Web. We took on sites like Scour, iCrave, RecordTV, all of which were
   either promoting the takedown of illegal movies or, as iCrave did,
   sucking up Canadian and U.S. television signals illegitimately and
   rebroadcasting them to the world via the iCrave Web site, along with
   their own advertisements. iCrave was promptly shut down by the courts,
   but its clones will not go away. Scour, and RecordTV are no longer
   functioning. But we are now in a new round of litigation with the
   likes of Morpheus, KaZaA and Grokster, all commonly described as
   next-generation Napster services.

   Put simply, whenever a new site appears whose prime allurement is the
   illicit availability of movies, illegitimately file-shared or readied
   for download, it is our intention to move with celerity to bring them
   to the courtroom. This includes, where appropriate, close coordination
   with and support for law enforcement agencies, like the Department of
   Justice, the FBI, the Customs Service, the Postal Service, the Secret
   Service, and others, in their efforts to provide criminal enforcement
   of the nations copyright laws.

   As a part of our copyright enforcement efforts, we are using Ranger, a
   sophisticated search engine, to track down movies illegitimately on
   the Web. Once Ranger sniffs out an illegal site, we send cease and
   desist letters to the Internet Service Provider whose customer is
   engaging in the infringing activity or, where possible, to the site
   itself. In 2001, we dispatched 54,000 such letters to 1,680 ISPs
   around the world.

   Keeping up with this sort of illegal activity is no easy task,
   particularly given the ascending growth of on-campus illegitimate
   downloads of brand-new movies. Students operating off their
   universitys broadband, high-speed, state-of-the-art computer networks
   have a merry old time uploading and bringing down movies, all without
   paying for them and all with fine fidelity to sight, sound and color.
   Were not talking about old, classic films. These are new films, many
   of which are still in theaters: Ice Age, The Rookie, Harry Potter,
   Lord of the Rings, Beautiful Mind, Panic Room, Monsters, Inc., We Were
   Soldiers, Snow Dogs, and the list goes drearily on.

   Just a few months ago we learned that one of Americas most prestigious
   and preeminent universities, vexed by the burden of heavy persistent
   student use of its computer system, actually set up a special server
   for Gnutella, a well known mightily used site for file-sharing (a
   discreet description of taking films which dont belong to you). This
   astonishing action was taken by this University to relieve the swollen
   student use of its computer system. I swiftly dispatched an
   unambiguous letter to the President of that University chiding him for
   "a disreputable plausibility" which collided with the moral compact
   that informs a stable, free, democratic society. The University, to
   its credit, immediately cancelled the server. But I must say that such
   good news is short-lived these days. I recently read that a closed
   peer-to-peer network of some 9,000 computers had been established on
   the high-speed local area network of another of our nations
   distinguished public universities. Similar systems are reportedly
   springing up on the university networks at public institutions around
   the country.

   And I do not mean to suggest that this problem is limited to
   universities. The recent search warrants executed by the Department of
   Justice and the Customs Service against the Drink-or-Die hacker group
   included not only individuals at universities, but also at well-known
   corporations. My music colleagues can tell you about a recent case
   involving a consulting firm that had set up a dedicated MP3 server for
   its employees to "share" music files. This problem does not appear to
   be getting any smaller.

   What makes this problem even more vexing and complex is its
   international dimension. Just a few months ago, in Taiwan a new Web
   site called Movies88.com came online, offering on-demand video
   streaming of brand new movies, all without permission of their owners,
   for a mere $1 per movie. All the while they steadfastly claimed that
   they were protected by the Taiwanese copyright laws. Fortunately, they
   were not, and with the cooperation of the Taiwanese government this
   site has now been shut down. But this case underscores the difficulty
   in enforcing copyright on global networks, like the Internet. The
   process is aptly compared to the game of "Whack-a-Mole" a site like
   Movies88.com will come down in one place, only to pop up somewhere
   else. Who is to say when a site like this reappears, it wont reappear
   in a country whose laws do not, in fact, protect copyright. This is
   why the work of the USTR, the State Department, and others in securing
   adequate minimum protections for copyright across the globe is so
   critical. This is no small problem, and no one-dimensional solution
   will address it.

                              The Second Front

   Promoting legitimate alternatives to digital thievery. Keep in mind
   that movie producers and distributors are filled with optimism over
   the prospect of the Internet as another new delivery system to
   dispatch their movies to consumers, at a fair and reasonable price
   (the defining of fair and reasonable to done by the consumer). And of
   course those very consumers are the ultimate beneficiaries of these
   new distribution channels, as they will enjoy more choices for
   accessing the movies they want in high-quality digital format.

   For studios to resist or to turn away from that new Internet delivery
   system would be fiscal lunacy. Why? Because the movie-making cost has
   risen to nerve-shattering heights. In 2001, the total cost to the
   major studios of making and marketing their films was, on the average,
   some $79 million per film! Only two in ten movies ever retrieve its
   total investment from domestic U.S. theatrical exhibition. Each film
   must journey through various marketplace sequences airlines, home
   video, satellite delivery, premium and basic cable, over the air TV
   stations and internationally in order to break even or make a profit.

   As we speak, every one of the MPAA member companies is engaged in one
   or more of several ventures to make online digital video-on-demand a
   reality. They are moving forward with these ventures even in the
   absence of a proven market and even with broadband penetration at
   relatively low levels (and languishing in its growth by some
   accounts). Why? Two reasons. First, they are hopeful that these
   ventures will be met with the same excitement and consumer embrace
   that we have seen with the DVD, which has quickly become the fastest
   growing consumer electronics platform in history. Second, and even
   more importantly, they are moving forward in this direction because,
   as I have said before, I believe (and I pray we are right) that 99% of
   the American public are not hackers. Given the choice between a legal
   alternative for watching movies and stealing, I believe the vast
   majority will choose the legitimate alternative, but only if we do not
   allow lawlessness to become "mainstream".

                              The Third Front

   To use technology to apply the protective garments of content
   encryption, watermarking and other necessities for guarding the life
   of movies as they make their way through the digital distribution
   chain, and to ensure that piracy remains out of the mainstream and on
   the fringes.

   In testimony before the Judiciary and Commerce Committees I have
   outlined a number of specific goals relative to the development and
   adoption of technology standards by the Information Technology (IT),
   consumer electronics (CE) and copyright communities. These include the
   adoption of a "broadcast flag" to prevent unencrypted over-the-air
   digital television broadcasts from being redistributed on the
   Internet; adoption and implementation of technology to plug the
   "analog hole" whereby protected content is stripped of its protection
   through the digital to analog, or analog to digital, conversion
   process, and the adoption and implementation of technology to limit
   the rising tide of unauthorized peer-to-peer file distribution of
   copyrighted works, of which I have spoken. The attainment of these
   goals is key to the viability of a legitimate marketplace for the
   online digital distribution of motion pictures, and we look forward to
   continuing to work with the IT and CE industries, as well as your
   colleagues on the Judiciary and Commerce Committees, to achieve a
   successful outcome on this front.

      The Important Role of the CJS Subcommittee in the Future of the
                     Internet as a New Delivery System

   The question is thus raised, what is it that this Subcommittee can do
   to protect Americas greatest trade export and to further the
   development of a legitimate marketplace for online digital
   entertainment for the benefit of the consumer?

   The answer is this: Your work is key to both the first and second
   fronts in the defense of copyright which I just described. Your role
   in the first front the enforcement front should be clear to all.
   Copyright law is only as good as its enforcement, and Federal
   resources for criminal law enforcement, both inside the United States
   and working with their counterparts overseas, are an important part of
   the overall copyright enforcement landscape. Ensuring effective
   copyright enforcement, in turn, has a very important effect on our
   success on the second front in the defense of copyright providing
   viable alternatives to piracy. The reason is simple: No legitimate
   business can succeed in an environment of unbridled lawlessness. Just
   as Greshams Law teaches that cheap money drives out good money,
   pirated content drives out legitimate content, particularly where
   digital technology renders the two substantial equivalents. Which is
   why the biggest threat to viable alternatives to piracy is unchecked
   and rampant piracy itself. Federal law enforcement plays an important
   role in ensuring that such piracy does not invade the mainstream of
   our society and render moribund nascent and consumer-friendly
   alternatives to lawlessness.

   We have worked closely with the Congress to ensure that our laws
   empower Federal law enforcement to protect copyright in the digital
   environment and to help preserve the vitality Americas creative
   industries. And we have worked closely with law enforcement in that
   process. As I mentioned, we are receiving first class assistance from
   the FBI, the U.S. Secret Service, the Department of Justice, the U.S.
   Customs Service, as well as local U.S. Attorneys offices.

   We have been pleased that the Administration has placed increasing
   priority on cybercrime enforcement, in particular, as copyright piracy
   is one of the most pervasive forms of cybercrime. In our view, greater
   attention by law enforcement to Internet cases is needed to ensure
   adequate copyright protections. The Department of Justice and Customs
   Service are to be applauded for their recent efforts in carrying out
   Operation Buccaneer a massive sting operation against the prominent
   Drink-or-Die hacker group, which spanned 6 countries and resulted in
   the execution of more than 70 search warrants, including at the
   offices of major corporations and some of this nations most
   prestigious universities. All in all, more than 100 computers were
   seized with some 50 terabytes (trillions of bytes) of data. One system
   seized had more than 5,000 movies on it. In fact, I understand a
   single defendant who pleaded guilty in February admitted to charges
   that involved uploading more than 15,000 movie, software, video game
   and music titles, causing damages conservatively estimated at more
   than 2.5 million dollars. I understand that a fourth guilty plea was
   entered just weeks ago, with more to come.

   Mr. Chairman, this is exactly the type of thing we should encourage
   our law enforcement agencies to do more of. It sends the clear
   deterrent message that theft is theft, whether conducted online or
   off. Your Committee plays a very important role in promoting this type
   of message through funding for cybercrime enforcement and through
   oversight of the various Federal law enforcement agencies. I hope
   Operation Buccaneer is just a start, and that we will see a continued
   increase in Federal online enforcement of intellectual property
   rights. I hope your Committee will encourage just such a result.

   We enthusiastically embrace the announcement last year by the
   Department of Justice of the establishment of 10 specialized Computer
   Hacking and Intellectual Property (CHIPs) units within individual U.S.
   Attorneys offices to focus on cybercrime prosecutions, including
   copyright and trademark violations. We believe the single biggest
   impact the Appropriations Committee can make on intellectual property
   and cybercrime enforcement is to ensure that adequate resources are
   available to these units to prosecute cases, as well as to the
   on-the-ground enforcement agencies to investigate and bring more cases
   to the U.S. Attorneys offices.

   Last year Congress approved a specific earmark of funds for cybercrime
   and intellectual property enforcement. This money has made possible
   the establishment of the CHIPs units and cases like the Drink-or-Die
   case. We would like to work with you again this year to provide a
   continuing earmark of funds for cybercrime enforcement, and to
   encourage full funding of existing CHIPs units and possible expansion
   to additional U.S. Attorneys offices.

   Fighting piracy outside the United States is also an extremely high
   priority. Although MPAA expends tremendous resources in operating
   anti-piracy programs in over 80 countries worldwide, we also rely on
   US Federal agencies to help us combat piracy outside the United
   States. The US Trade Representatives Office, the State Department, the
   US Copyright Office, the Commerce Department, the Patent and Trademark
   Office, Customs, Justice, the FBI -- all play critical roles. In
   helping to engage the cooperation of foreign governments, these
   agencies utilize all the skills and tools at their disposal from
   enforcing trade agreements, to diplomatic advocacy, to training and
   direct cooperation with foreign enforcement officials. These agencies
   are all that stand between us and anarchy in the international
   marketplace. Ensuring that these agencies also have the resources to
   continue to dedicate to the fight against intellectual property theft
   outside the United States is also a high priority.

   Mr. Chairman, I want to thank you for focusing this Subcommittees
   attention on such important maters, and I look forward to working with
   you in the coming months.

   I close this document with Mr. Churchills exhortation: "Truth is
   incontrovertible; panic may ignore it, malice may distort it,
   ignorance may deride it, but there it is."

   A singular truth exists in the movie industry: "If you cant protect
   what you own, you dont own anything."

###



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