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How Effective Is Justice Department Crackdown on Counterfeit Goods Dealers?

The Justice Department used Cyber Monday, the biggest online shopping day of the year, to shut down 150 websites that were allegedly peddling fake shoes, sporting goods and handbags. Gwen Ifill discusses the crackdown on counterfeit goods with author Larry Downes and Steve Tepp of the U.S. Chamber of Commerce.

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    We look now at the government crackdown on the online sale of counterfeit goods. The Justice Department used Cyber Monday, the biggest online shopping day of the year, to shut down 150 websites that were allegedly peddling fake shoes, sporting goods and handbags. But was this the right approach?

    Joining us to discuss that are Steve Tepp, chief intellectual property counsel at the U.S. Chamber of Commerce, and Larry Downes, author of “The Laws of Disruption,” a book about law and innovation in the digital age.

    Steve Tepp, what is the scope of the problem that the Justice Department was acting on?

  • STEVE TEPP, U.S. Chamber of Commerce:

    The scope of the problem is unbelievably huge.

    Rogue websites, those dedicated to the theft of American intellectual property, our creative and innovative products, get over 53 billion visits every year. That’s nine visits for every human being on the face of the Earth. And they have been estimated to do at least $135 billion in harm to legitimate businesses.

    The products they sell are made in completely unregulated facilities and can often be, not only shoddy, but harmful to consumers’ health.


    Is it a problem that’s growing, or something which has tailed off, or is just technology allowing it to feed on itself?


    It’s a massive problem that’s growing every day, because many of these sites are located outside the United States, where there is no remedy.

    For the sites located in the U.S., or at least where their domain name is registered in the U.S., dot-com, dot-net, then our enforcement agencies, like the Immigration and Customs Enforcement and the Department of Justice, who are both doing fantastic work on this, protecting the American people, can go to court and seize those domains with a court order.

    That’s what happened yesterday, and that’s 150 domain names that will not be used to steal American jobs, to harm American consumers today.


    Larry Downes, was the government correct in moving in on these websites?

  • LARRY DOWNES, “The Laws of Disruption”:

    Well, of course, we don’t know how correct they were.

    They use a procedure here that is legally dubious and it’s been challenged in order to seize the domain names under civil forfeiture law. We don’t know the details, whether or not this is adequate. If what happens afterwards is, the site owner, if they want the domain name back, they actually have to sue the U.S. government in U.S. court to try and get the sites back.


    Well, do you agree this is a big problem, or is the government overreacting to the problem?


    Well, first, it should be noted that, you know, what we’re seizing here is not the website itself, just the domain name. It’s a largely symbolic act.

    What happens is, the site is still there. It can be accessed directly from the I.P. address. Or what often happens is the site comes back a little bit later under another domain name. So whether that is effective or not, it doesn’t matter.

    The point about the data is, I think it’s pretty clear that most of the data about the scope this problem — and I agree of course it is a significant problem — but the data is extremely poor, it’s outdated. Most of it has been discredited.

    And, indeed, Congress in a pending legislation is asking for a study to determine just how bad and where the real problems are coming from, something they want to do after they legislate.


    So it sounds like you’re saying two things, one, that this is a Whac-A-Mole issue, that they knock down it one place, and it pops up another, and that the problem itself isn’t — there’s no demonstrable way of saying that the problem is as bad as the government says?


    Well, I think it can be demonstrated. It just hasn’t been demonstrated.

    And I applaud the idea of an actual study that would show with credible data and with credible research methods just how serious the problem is and, more to the point, where the real problems are. Are they foreign sites, which is what we’re hearing now? Are they in particular countries? Are they using particular techniques?

    The more we know about where the problem is and how big the problem is, the better job we can do to try and both regulate and enforce our laws.


    Well, Steve Tepp, what do you say about that, that the numbers haven’t been proven, that they’re just out there?


    Well, the studies are there, and they’re recent.

    The 53 billion visits was a study that was produced at the beginning of this year. Another study earlier this year showed that 19 million Americans have jobs that rely on I.P.-intensive industries. This is a huge part of the American economy. Sixty percent of U.S. exports are from I.P.-intensive industries. And $7.7 trillion are output from I.P.-intensive industries.


    Why can’t the private sector regulate this on its own simply by, if you are the person who runs the sneaker website that’s being traded — the counterfeit property is being sent out, you sue, and you knock it down, not allowing the government to do it?


    If we can find who is behind the website and if they’re in the United States, yes, they’re breaking U.S. law. In fact, they’re breaking international law. And those remedies are available and enforceable.

    The problem is, even if the website is registered here with a dot-com or dot-net address, the operator or servers may be anywhere in the world. And they may be very hard to find. Among the great things that Immigration and Customs Enforcement and the Department of Justice are doing here is, it’s not just seizing the domain name, which is critically important, by the way, because, even if the website comes back, these sites are designed to deceive. They look legitimate.

    If your website that you shop at is constantly changing its domain name because it’s being chased around, that’s a pretty good indication that it’s not a legitimate business. And they have followed up these seizures with forfeiture, going all the way through the full court process, full due process, as in any other federal court case.

    And there have been hundreds of arrests and hundreds of convictions. These are criminals who want to steal our jobs, steal our innovative and creative products. And they’re selling dangerously defective products into the American market, all just to make a cheap buck.


    Larry Downes, if you stipulate that this is a problem, what — that the government shouldn’t be using a blunt hammer as a solution, what do you suggest?


    Well, I think, you know, first of all, Congress over the last 20 years has greatly expanded the protections available both civilly and criminally for copyright and trademark enforcement, including several bills aimed specifically at problems having to do with the Internet.

    And there’s ample evidence that those new laws and those new procedures are proving both effective and cost-effective. That’s one of the big problems with what’s going on now, is there’s no real cost-benefit to this. We’re tinkering with the Internet’s infrastructure. Some proposals would go even further and require ISPs to remove certain domain names with significant security and engineering problems that haven’t been addressed.

    All of this is done entirely in a one-sided process where, you know, of course, there’s — you know, here in Silicon Valley, we create a lot of jobs. We have a lot of economic value, too, but Silicon Valley is just not part of this discussion. And the laws that are being progressed and the way that they’re being enforced is really a very one-sided way, without any real cost-benefit.


    How about laws that are in the pipeline now in both the House and the Senate? Are they not using the correct approach, in your opinion?


    No, I think they’re not. They are both sort of throwing a lot of spaghetti against the wall to see what is going to stick.

    They introduce a lot of new civil and criminal enforcement powers. They change the standard of liability for third-party websites. They try to change the way in which private parties can take down content that they don’t like. And they give the Department of Justice the ability to require Internet engineering changes that security experts and Internet engineers have soundly condemned ever since this process started a couple of years ago.


    Spaghetti against the wall.

    This feels, when you first hear about this, like a really good “consumer news you can use” protection, but he says they’re just — they’re just throwing stuff out there.


    This is critically important to protect the 19 million American jobs and American consumers, because, in addition to the rogue websites that are based in the United States or at least have those domain names that our enforcement agencies can reach through the existing court process, there are many rogue sites that are based entirely outside the United States.

    They’re ripping us off and laughing all the way to the bank. The legislation pending in Congress, rogue sites legislation, is designed to cut those sites off from the U.S. market, to create a court procedure, full due process, so that a judge can rule these sites are dedicated to the theft of American intellectual property.

    And there’s a campaign of 350 companies, trade associations, and professional organizations from every corner of the country, from dozens of different sectors of the economy who support rogue site legislation.


    Larry Downes, is it at least worth it for public awareness?


    Well, there’s public awareness, of course, of the problem. And I agree that’s significant.

    But it also sends a very bad message about how the U.S. is willing to tamper with the Internet in ways that, when foreign governments do it in political speech, we object. Now, I’m not saying that this is censorship, but it certainly doesn’t look good for the U.S. to be tinkering with the engineering of the Internet in ways that we don’t like it when foreign governments do the same thing.


    Larry Downes, author of “The Laws of Disruption,” and Steve Tepp of the Chamber of Commerce, thank you both very much.


    Thank you, Gwen.


    Thank you.

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