DVD, SOFTWARE PIRACY LINKED TO ORGANIZED CRIME, TERRORISM

“We're pretty much unanimous” on House Judiciary Courts, Internet & Intellectual Property Subcommittee that problem is serious, growing and worthy of congressional examination, Chmn. Smith (R-Tex.) said at conclusion of hearing. However, Smith, ranking Democrat Berman (Cal.) and others seemed to indicate subcommittee wasn’t inclined to introduce legislation on subject immediately, but rather would use high profile of Congress to spur more aggressive law enforcement in U.S. and treaty compliance by foreign powers.

There were 7 million pirated DVDs seized by motion picture industry in 2002, MPAA Pres. Jack Valenti said. He gave multimedia presentation showing creative ways pirates operated, with one factory smuggling goods in underground tunnel, another manufacturing goods in submerged barge towed by fishing boats. Smith and Berman both cited their own statistics on piracy, with Smith suggesting $9 billion loss annually to piracy in 56 countries, and Berman countering that with all nations included total loss was more like $20-22 billion. Consistent with previous testimony to Congress, Valenti insisted Congress had role to play in fight against piracy.

Dept. of Justice is doing more than ever to prosecute intellectual property theft, Deputy Attorney Gen. John Malcolm said. Calling such enforcement “a priority” for himself and DoJ, Malcolm said 13 Computer Hacking & Intellectual Property (CHIP) units nationwide were working on cases, as well as Malcolm’s division, Criminal Div. Computer Crime & Intellectual Property Section (CCIPS), which on Wed. indicted alleged online pirate known as “Bandito” who was operating out of Australia. DoJ is seeking to extradite him to U.S., Malcolm said, sending signal to pirates that being outside U.S. wasn’t sufficient protection from prosecution. “We are trying to cut off the heads of some very large snakes that are putting out this material and hurting our economy,” he said.

While Malcolm outlined in detail how piracy was connected with organized crime, he was less specific when addressing connection to terrorism. “It’s difficult to give you precise examples,” he told curious Smith, and “it would surprise me greatly if the number [of terrorist cells funded by piracy] is not large.” Piracy is attractive to terrorist groups, Malcolm said, because “it’s an easy enterprise, the barriers to entry are small, the profits are huge and illicit organizations are looking to raise as much money as they can, as quietly as they can and as quickly as they can.” Several members argued that there should be public service announcements highlighting connection between acquiring pirated goods and international terror groups, suggesting PSAs linking drugs to terrorism had been effective.

Microsoft Senior Mgr.-Worldwide Antipiracy Investigations Richard LaMagna said Justice was limited because it wasn’t sufficiently able to prosecute piracy of components of software, such as certificates of authenticity or other labeling that suggested to consumers that pirated copy might be authentic. Pirates trafficking in those components “know that they can’t be arrested, they can’t be prosecuted for that,” LaMagna said, calling it part of software piracy operation that would cost U.S. $1.6 billion in lost tax revenue by 2008. Malcolm said he was in discussions with Microsoft on component issue but wasn’t ready to recommend that Congress draft new law for component piracy.

Several witnesses said part of problem with piracy was that foreign govts. either were not enforcing intellectual property laws or, in some instances, were participating in piracy. Committee heard from film distributor Joan Vidov, who in 1992 bought licenses of several animated Russian films, only to have Russia’s Ministry of Culture create company that claimed licenses as its own. Despite repeated victories for Vidov in Russian and international courts, she still finds Ministry interfering with her business, she said: “It’s the worst kind of organized crime.” Valenti singled out Russia as “out of control” and said he would be meeting with minister responsible for intellectual property protection there in late April or early May. Berman told us after hearing that he believed subcommittee already had helped because Russian govt. had contacted subcommittee before hearing. Russia wants to be part of World Trade Organization (WTO), have U.S. trade restrictions such as Jackson-Vanik removed, etc., and for that to happen they will have to enforce intellectual property law, Berman said.

New addition to subcommittee suggested he was as suited for career in Hollywood as in Congress. Freshman Rep. Carter (R- Tex.), 20-year judge from Austin area who has dived aggressively into tech issues since arriving in Jan., said tale of international piracy and organized crime was compelling story. Given Hollywood’s skill at moviemaking, Carter asked Valenti, “Why don’t you all start making movies about this?” Valenti replied: “Do you have an agent?” He said “that’s a darned good idea. I hadn’t thought about that. In fact, I'm going to suggest it to some writer friends of mine out in Hollywood.”