Last week several members of Congress — Senators Wyden, Cantwell, Moran, and Paul, and Reps. Issa, Lofgren and Chaffetz — floated a proposal to substitute for the contentious proposed Stop Online Piracy Act, previously discussed here.  Sen. Wyden’s office has commented on the compromise, and TechDirt has a writeup and a copy of the document here. The proposal omits the elements of SOPA that had run into the most resistance. Gone is tinkering with fundamental Internet architecture such as the use of the domain name system. Gone is the involvement of the Attorney General. Gone is the criminal copyright streaming provision that could, theoretically, make a teenage Justin Bieber a felon for streaming amateur videos featuring his renditions of songs by his favorite artists.In all these ways, the Wyden compromise is significantly better than SOPA. So what’s left?The compromise framework makes an interesting conceptual maneuver: it links international trade in counterfeit goods (think fake Gucci handbags or DVDs) with international Internet downloading or streaming of copyright infringing material. From the proposal, “In a digital economy, illegally downloading a movie from a foreign website is no different than importing an illegal copy from a company in China.”There are certainly similarities between physical and virtual IP violations — both, after all, involve intellectual property laws, and DVDs in particular are containers for the same content that otherwise can be streamed online.  But there are big differences, too. International counterfeiting rings involve hard losses to U.S. manufacturers by providing products to people who, in buying them, are showing that they might otherwise be buying the real thing. Shady download sites are quite possibly another story: those willing to ferret out free files amidst the banner ads at a “.ru” address might not buy legitimate DVDs and CDs even if the overseas site were unavailable.  Downloads of free (but copyright infringing) content simply may not represent lost purchases of the real thing to the same degree that people paying for counterfeit goods may buy the real ones if the fakes aren’t available.  More important, a lot of the reasons for aggressive trademark enforcement has to do not only with lost sales to legitimate sellers, but public safety.  Many physical products with gray market origins may not be safe to wear, eat, or give to your kids, and may be virtually indistinguishable from their authentic counterparts.

The linkage between real and virtual, however, paves the way for the meat of the compromise proposal.  It involves an obscure century-old U.S. entity: the International Trade Commission, an “independent, nonpartisan, quasi-judicial federal agency.”  From its website:

“The mission of the U.S. International Trade Commission is to: (1) administer U.S. trade remedy laws within its mandate in a fair and objective manner; (2) provide the President, the United States Trade Representative (USTR), and Congress with independent, quality analysis, information, and support on matters relating to tariffs and international trade and competitiveness; and (3) maintain the Harmonized Tariff Schedule of the United States.”

In general, a U.S. company can complain to the ITC about anti-competitive practices by foreign competitors such as dumping (selling items far below cost to put others out of business) or patent or trademark infringement (making product knock-offs).  The ITC, in turn, can affirm that such practices are happening, which then leads to a complex process by which the U.S. Department of Commerce can impose punitive tariffs on the import of foreign goods.  You can see a list of “cases” pending before the ITC here. (Cases may belong in quotes because, as the ITC says, “The USITC is NOT a policymaking body. It is NOT a court of law. It does NOT negotiate trade agreements.”)

The ITC process takes awhile.  For example, in March of 2010 Apple lodged a complaint about HTC infringing its patents.  An administrative judge set a target date to rule about it around 15 months from the complaint; and the ITC made an initial determination in July of 2011.

With this background, we can infer how the framers of the SOPA compromise came up with the idea of bringing in the ITC. One big problem with the original SOPA proposal is that private parties could go directly to intermediaries like payment providers and ad networks with complaints about sites “dedicated to theft of U.S. property” and demand that they be cut off, with no disinterested party weighing in on the merits of the complaint. With the ITC, there’s a way to get some due process into the picture: under the compromise, private parties aggrieved by copyright infringement made possible by foreign web sites lodge complaints with the ITC over “digital imports … by foreign websites.”

If the ITC agrees the the foreign website is infringing copyright, it could issue a cease-and-desist order against the website, and the rightsholders could then use the order to compel domestic payment providers and ad networks to break off relationships with the foreign site.  There’s also provision for the ITC to penalize rightsholders who lodge frivolous claims.

But there are important issues left unresolved in the draft — which, at two pages, doesn’t cover many details.  On a mundane level, it’s not clear what counts as a foreign website.  SOPA’s definition was odd: it was any site that used an overseas registrar for its domain name.  That’s an unusual definition — it could include lots of sites that are hosted in the US but just happened to register a domain name by using an overseas name retailer.  Presumably the right definition covers only sites that are truly overseas, and perhaps completely so — ones beyond the reach of traditional U.S. civil law enforcement processes, which is why further legislation is called for.

More fundamentally, there’s a question about how well suited the ITC is to solve the due process worries of the original SOPA’s notice-and-takedown.   A look at the ITC’s current caseload shows comparatively low volume and long lead times — a few dozen open cases at any one time.  If the idea is to go after “kingpin” sites — the Pirate Bays of the world — then this may not be a problem. But if the proponents of Congressional action here are hoping to do voluminous takedowns of an expansive and rotating cast of sites, then the ITC’s involvement becomes tricky.  The proposal alludes to “boost[ing] the ITC’s administrative capacities,” perhaps in anticipation of having to buff up the commission’s infrastructure to handle an influx of claims.  However, more staff doesn’t address the deeper problem of a punt to the ITC.  To sort out meritorious claims of undue infringement from borderline ones from frivolous ones, each adjudication would likely take days or weeks.  That pace would likely not satisfy IP holders, who want to be able to whack the moles as they pop up.  But to make the process hours instead of days would eliminate the value of getting a quasi-public agency into the mix to determine the validity of claims.  HTC isn’t going anywhere, so Apple can bring a case to the ITC about its claimed patent infringement.  It’s a different story with a site like listen4ever.

As a political matter, SOPA may have represented an opening bid in a negotiation — after which the SOPA proposers found themselves surprised that it might actually pass unamended. Pushback across the spectrum has made that outcome less likely, and this compromise could be a continuation of a negotiation.  (To be sure, the Congressional proponents of SOPA appear to be unimpressed by this compromise, while suggesting that some changes will be made.)

The question Congress ideally would take up before passing anything is an empirical one, because overseas copyright infringement is a classic example of a public policy issue that hungers for real data.  We’d do well to have less unanchored rhetoric around this topic and more information about just what kinds of sites proponents want to target and what evidence they can produce to show the harm these sites are causing. Then Congress could evaluate how risky or costly legislative action against those sorts of sites would prove.  This is an earnest plea — we really could benefit from good data here.

Without it, any compromise may be simply pitted against a caricatured initial proposal — when both are ill-considered.  Bottom line: the Wyden compromise is significantly better than the original SOPA proposal, and it might form the basis for a new law against egregious overseas “kingpin” infringement.  A narrowly tailored proposal fleshing out the compromise would test how much the publishers seeking the law mean to go after only the big fish.  And developing some real data on the scope of the problem and the impact of solutions is both desirable and doable.