US Lawmakers Seek IP Enforcement Agency; Satellite Radio Royalties Set

By Dugie Standeford for Intellectual Property Watch
A bipartisan group of US legislators is calling for tougher civil and criminal penalties for copyright and trademark infringement through new legislation introduced last week. Meanwhile, the US Library of Congress Copyright Royalty Board (CRB) has set royalties for satellite radio services, as webcast radio companies lobbied for rate parity.

The “Prioritising Resources and Organisation for Intellectual Property Act of 2007 (PRO IP),” introduced 5 December, would create an IP enforcement czar, establish a new IP division in the Department of Justice, and authorise the appointment of IP officers to help foreign countries combat piracy and counterfeiting.

The measure, HR 4279, won praise from the film and manufacturing sectors, but one public interest group warned its higher penalties could have unintended consequences for consumers.

The US needs PRO IP to maintain its competitive edge in the global marketplace, said House Judiciary Committee Chairman John Conyers, who co-authored the bill. The measure is backed by labour unions and industry groups concerned about the growing economic cost of counterfeiting and piracy, currently estimated at between $500 and $600 billion per year in lost sales and five to seven percent of global trade, he said.

The proposal significantly increases penalties for copyright and trademark infringement and stiffens civil and criminal seizure provisions. It establishes the Office of the United States IP Enforcement Representative in the Executive Office of the President to coordinate and improve national and global enforcement efforts, as the president’s “principal advisor” on IP enforcement. The action would appear to put IP enforcement on the same level with the Office of the US Trade Representative in the executive office.

The measure authorises the director of the US Patent and Trademark Office to name 10 IP attach�s to assist foreign governments in enforcing IP laws, particularly against piracy and counterfeiting, and to help owners of US-granted rights to protect them abroad. It creates a permanent new IP division in the Justice Department charged with coordinating law enforcement activities; transfers the functions of the existing Computer Crime and IP section to it; and gives the agency additional funding and personnel.

Motion Picture Association of America Chairman Dan Glickman said the business community “can speak in one voice” in support of the legislation. National Association of Manufacturers President John Engler called it an important first step in addressing “an issue plaguing nearly every American manufacturer.”

But Public Knowledge President Gigi Sohn said that while the bill “rightly” targets enforcement of copyright law against commercial infringers, some of the provisions could hurt ordinary consumers. Seizing expensive manufacturing equipment used for large-scale infringement from a commercial pirate might be appropriate, she said, but taking a family’s all-purpose computer in a download case, as the measure would allow, is not.

The proposal also diverges from patent reform legislation recently approved by the House, Sohn said. Instead of limiting damages to relative harm, as the patent bill does, PRO IP “takes already extraordinary copyright damages and increases them,” heightening the threat of litigation intended to stifle competition and potentially forcing faster and larger settlements from innovators, she said.

The House Judiciary Subcommittee on Courts, the Internet and Intellectual Property will hold a hearing on the measure next week, said Chairman Howard Berman, a California Democrat.

Help for Webcasters?

On 3 December, the CRB set satellite radio performance royalties for the period 1 January 2007 to 31 December 2012.

The order requires XM Satellite Radio and Sirius to pay a licence rate of six percent of gross revenues subject to the fees for 2007-2008, 6.5 percent for 2009, seven percent for 2010, 7.5 percent for 2011 and eight percent for 2012.

Revenue subject to royalties includes subscription fees and income from advertising from channels other than those that use only incidental performances of music.

Reaction to the ruling was tepid. The decision ended a year-long proceeding with record labels and gives satellite radio broadcasters certainty about music performance royalties through 2012, said XM Chairman Gary Parsons. The fees fall within the range projected by financial analysts, he said.

SoundExchange, which collects and distributes digital performance fees for artists and copyright owners, said its reaction to the ruling was “mixed.” The decision “dramatically” increased the rate now paid by the services, validating the overwhelming evidence SoundExchange presented about the critical importance of music to satellite programming, the organisation said. However, it had sought rates starting at eight percent.

The CRB rejected nearly all evidence submitted by XM and Sirius, but federal law requiring that any new royalty rate not overly disrupt satellite services led it to set fees at half the value it determined artists and record companies would have received in the marketplace, SoundExchange said. The result once again “highlights the inequity of a rate standard” that forces music creators to subsidise some music services with below-market rates, SoundExchange Executive Director John Simson said.

But webcasters, whose war against a CRB royalty ruling they say will stifle their industry (IPW, Copyright Policy, 15 July 2007) remains unresolved, may be hoping the satellite decision will help them.

In letters to Berman and Senate Judiciary Committee Chairman Patrick Leahy (D-Vermont), five Internet radio services, including RealNetworks, AOL Radio, Yahoo! Radio, Pandora and Live365, said Congress should equalise royalties among all radio services, whether webcast, satellite, cable or traditional broadcast.

Broadcasters pay no royalties, and most satellite and cable radio services historically pay between three percent and 7.5 percent of revenue, but Internet radio fees now average more than 50 percent of revenue, the companies said on 5 December. They urged Congress, which is investigating the traditional broadcast exemption, to end the “vastly disparate royalty obligations.”

Dugie Standeford may be reached at info@ip-watch.ch.