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This filing is available as a PDF.
Stanford K. McCoy
November 4, 2010
Re: 2010 Special 301 Out of Cycle Review of Notorious Markets, USTR-2010-0029
Dear Mr. McCoy:
Since 2006, the USTR has singled out foreign companies that, in its estimation, operate “pirate websites.” As part of its Special 301 report, it places these foreign companies on a list of “notorious markets.” Now, in accordance with the 2010 Joint Strategic Plan on Intellectual Property Enforcement, it will separately publish this watchlist. The increased prominence of the USTR’s enforcement role warrants increased scrutiny—after all, it is unusual for an agency of the US government charged with trade policy to concern itself directly with law enforcement matters. Public Knowledge’s primary recommendation is that USTR abandon its move toward becoming a law enforcement agency, as it is unsuited to the role. But because it appears that USTR is going to continue down this path, PK offers these comments outlining some of its concerns, along with recommendations as to how USTR might improve its process.
The USTR is Taking on Law Enforcement Responsibilities, and Must Act Accordingly
The USTR cannot have it both ways. It claims that its “notorious markets” list “is not a finding of violations of law,” but wants the list to “encourage the responsible authorities to step up efforts to combat piracy and counterfeiting in these and similar markets.” This is at worst a contradiction, and at best a sign of the vague purposes of the notorious markets list. The USTR cannot evade the role it has taken on: Creating a watchlist of foreign companies it claims violate the law is a fundamentally law enforcement activity, not a trade policy activity.
More clarity is in order. If the list is intended as a preliminary step to further legal action, the USTR must first acknowledge this. It must then clearly articulate exactly what the foreign company is accused of. If the USTR believes it is likely that a given enterprise is violating its domicile nation’s laws, it should say so—recognizing that a sovereign nation and its courts, and not a US agency, are the arbiters of what is and is not legal within its borders. If the USTR believes that a foreign nation should change its laws so that a company operating under its jurisdiction becomes illegal, then it should say that, too. (Of course, it should recognize the need for proper legal process—unlike the IIPA which, noting that the Czech Ministry of Justice had informed the US that imposing new secondary liability laws would violate the Czech constitution, requested that the Czech government impose such laws anyway.) Of course, in cases where a company is violating no laws, there is nothing to enforce. In such cases, the USTR must not ask that foreign law enforcement agencies “take action” or that foreign governments apply extralegal pressure to shut down “notorious,” but possibly legal, services. For example, while Allofmp3 certainly would have violated US law were it based here, the site had a colorable claim of legality under Russian law. Rather than getting its day in court, however, the company was pressured to shut down by the Putin regime. The fundamentals of due process apply even to those companies the USTR deems “notorious.”
Furthermore, when identifying foreign companies it believes are violating the laws of their domicile nations, it should state whether it believes that they are direct or secondary infringers, and it should cite to the statutes these companies run afoul of. For example, in the US, Allofmp3 would have been a direct infringer of copyright. Search engines like Baidu or Google, however, if they are held to be liable for copyright infringement at all, would probably be secondary infringers. There is a vital distinction between direct and secondary infringement, and the USTR must make it. Furthermore, by citing the foreign laws it believes companies are violating, it will ensure it is not disregarding the laws of its trading partners.
Finally, before it places any company onto a watchlist of potential wrongdoers, the USTR must adhere to the basics of due process: Notice, and the opportunity to be heard. Overseas business should not be obligated to follow the Federal Register or Inside U.S. Trade to see what the US government is up to. Thus, before placing any business on its Notorious Markets list, the USTR should provide the business with notice of the charges made against it, and give it the opportunity to make its case. In general, USTR must ensure that it does its job fairly and in accordance with the high standards of process and accountability that are appropriate for a government agency, and should not pass along industry views without its own analysis.
The USTR Must Not Misstate US law, Nor Assume It Applies Worldwide
The content industry often states that linking to or hosting infringing material, without more, is itself an infringement. As to US law, this is false: in general, the infringer himself is liable, not those he may have purchased goods or services from.
Cases of secondary liability are high profile and fiercely fought. But they are relatively rare. In general, search engines are not liable for providing links to infringing material. The direct infringers—the people who have put infringing material online themselves—are liable. Similarly, in general, file hosts are not liable for providing storage to infringing users if they comply with the DMCA. The infringing users who have actually violated copyright law by putting infringing material online are liable.
In the past, the USTR has passed along complaints about certain online services like Baidu and “webhards.” In doing so, it has pre-decided complex legal and factual issues. It is as though the French government had stepped in to preemptively declare that a French company was in the right in a billion-dollar lawsuit against an American company. Going forward, the USTR must take a more balanced approach. The content industry has a track record of trying to criminalize new technologies, from piano rolls to search engines, from VCRs to MP3 players. Its claims should be taken with more than a few grains of salt.
PK can’t claim to know whether any services that appear on the USTR’s watchlist would violate US law were it applicable, or whether they violate Chinese, South Korean, or any other country’s laws. But if the USTR is going to take sides in the matter, it should articulate its reasons. What is its basis for declaring that a webhard service is a “notorious” infringer, and how does this service differ from an ordinary, non-infringing web host or online file locker? What is the specific factual and legal basis for placing Baidu on a watchlist, but not Yahoo or Google? Because its watchlist is intended to “encourages the responsible authorities to step up efforts to combat piracy and counterfeiting in these and similar markets,” the USTR is obligated to provide a factual and legal basis to those “responsible authorities” if it expects them to proceed.
A Balanced IPR System That Respects Due Process is an Economic, Consumer, and Human Rights Necessity
It can be appropriate for the US government to engage in negotiations with other countries to get them to acknowledge American IPRs, just as it can be appropriate for the US government to negotiate with other countries about other technical matters, such as currency valuations and tariffs. But it should place this work in context, bearing in mind the need for a balanced system that does not merely grant rents to certain industries to the detriment of others, and to economic development as a whole. To assist it in this, PK has previously submitted to the USTR documents demonstrating the need for balance in IP systems, to preserve a balance between the interests of authors and end users, and to ensure that overly protecting one segment of the economy does not stifle another area. But because the USTR is taking now taking on a law enforcement role, as well as promoting US economic interests, it should be held to a higher standard. Respecting the due process of law is a fundamental human rights requirement, enshrined both in the US Constitution, which requires that the government respect “the due process of law,” and in the Universal Declaration of Human Rights, which states that (in a criminal context) that “[e]veryone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal.” This fundamental right to due process is implicated when the United States government creates a list of companies and encourages people to “take action” against them.
But it is not enough for the USTR to respect legal norms and due process when engaging in enforcement activities. More generally, when USTR advocates that other countries strengthen their IPR systems, it should take account of the widely-accepted view that a balanced IP system is not only an economic necessity, but a human rights requirement. For instance, Article 27 of the Universal Declaration of Human Rights recognizes the need to balance author’s rights with the “right freely to participate in the cultural life of the community, to enjoy the arts and to share in scientific advancement and its benefits.” Article 15 of the International Covenant on Economic, Social and Cultural Rights contains a similar requirement of balance, as the UN Committee tasked with implementing that Covenant acknowledged when it wrote that “[t]he allocation of rights over intellectual property has significant economic, social and cultural consequences that can affect the enjoyment of human rights.” Indeed, the need for balance for ethical as well as economic reasons was stated plainly by the UN Office of the High Commissioner for Human Rights, which wrote that “there are apparent conflicts between the intellectual property rights regime embodied in the TRIPS Agreement, on the one hand, and international human rights law, on the other,” noting the “primacy of human rights obligations over economic policies and agreements.” As the Vatican has observed, intellectual property rights were created for a pragmatic purpose, and when treated as an end in themselves they can contravene other vital interests. For example, Archbishop Silvano M. Tomasi recently stated that “[t]he raison d’être of the protection system of intellectual property is the promotion of literary, scientific or artistic production and, generally, of inventive activity for the sake of the ‘common good.’” The Archbishop further noted that “[a] stronger system of protection could either enhance or limit economic growth.” The Vatican has been consistent in advising caution when strengthening IP laws: a recent Encyclical Letter from the pope denounced “excessive zeal for protecting knowledge through an unduly rigid assertion of the right to intellectual property.”
IPRs do not trump due process and human rights, and beyond a certain point IPRs can hinder rather than harm economic development. Therefore, in pursuing its dual law enforcement/trade policy agenda, USTR should advance the broader interests of the American people, and not simply promote the proprietary interests of large content industries.
* * *
The USTR should stop its transformation into a law enforcement agency. But at a minimum, for the foregoing reasons, it should acknowledge its new enforcement agenda, and improve its process to respect legal norms.
/s John Bergmayer
 Office of the United States Trade Representative, 2010 Special 301 Out of Cycle Review of Notorious Markets: Request for Public Comment, 75 Fed. Reg. 60854, 60855 (Oct. 1, 2010).
 Indeed, it is hard to imagine how action called for by the Joint Strategic Plan on Intellectual Property Enforcement, issued by the Intellectual Property Enforcement Coordinator, is not a “law enforcement” activity. See Plan at 9, http://www.whitehouse.gov/sites/default/files/omb/assets/intellectualproperty/intellectualproperty_strategic_plan.pdf.
 2009 IIPA Comments at 4.
 Id. at 5.
 It seems that shutting Allofmp3 was a Pyhrric victory for the content industry, however, as Allofmp3 “clone” sites continue to thrive and the question of the legality of this kind of service under Russian law remains unsettled. Had proper legal process been followed, by now there might be a clear means by which content owners can enforce their rights against such sites.
 For instance, the IIPA has stated that providing links to infringing material is itself an infringement. See 2009 Comments of IIPA at 86 (discussion of “Baidu’s unauthorized deep-linking service.”).
 See Public Knowledge et al. Special 301 comments, http://www.publicknowledge.org/pdf/pk-eff-special-301-20100218.pdf; see also Public Knowledge et al. comments on the Joint Strategic Plan, http://www.publicknowledge.org/pdf/pk-et-al-jsp-comments.pdf.
 U.S. Const. amends. V, XIV.
 Art. 10.
 United Nations Committee on Economic, Social and Cultural Rights, Substantive Issues Arising in the Implementation of the International Covenant on Economic, Social and Cultural Rights at 2 (Twenty-seventh session, Geneva, 12-30 November 2001, Agenda item 3).
 United Nations High Commissioner for Human Rights, Sub-Commission on Human Rights resolution 2000/7.
 Statement by H.E. Archbishop Silvano M. Tomasi, Permanent Representative of the Holy See to the United Nations and Other International Organizations in Geneva at the 48th Series of Meetings of the World Intellectual Property Organization’s General Assemblies, Geneva, 21 September 2010, available at http://nunzio-un.blogspot.com/2010/10/statement-by-h.html.
 Encyclical Letter Caritas in Veritate of the Supreme Pontiff Benedict XVI to the Bishops, Priests and Deacons, Men and Women Religious, the Lay Faithful, and All People of Good Will, on Integral Human Development in Charity and Truth, ¶ 22, available at http://www.vatican.va/holy_father/benedict_xvi/encyclicals/documents/hf_ben-xvi_enc_20090629_caritas-in-veritate_en.html.
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