This morning, Jeff Rossen of the “Today” show reported on the techniques cyber criminals use to scam consumers into buying counterfeit products online.  These cyber criminals make billions ripping off Americans by selling counterfeit goods and pirated content, and are increasingly sophisticated in selling their products through popular online search engines and advertising services that make their products appear to be legitimate.  The report also showed how American companies profit from this illegal activity by selling advertising to cyber criminals. 

Here’s the story of one consumer who thought she was buying a real product but unknowingly purchased a counterfeit:

“High school senior Lauren McMillen just wanted to learn Spanish. So her dad went on eBay and spent $200 on what he thought was a never-opened Rosetta Stone software kit. ‘The ad said it was brand new and shrink-wrapped,’ Brian McMillen said. ‘Seemed absolutely legit.’  It arrived and it looked legit, down to the instruction manual, stickers, even inscriptions on the disks. But, Brian said, ‘We tried to install it, and it kept popping up an error message every time you started the product.’  It didn't work because it's a fake. Authorities say some even install viruses on your computer to steal your personal information. ‘It's not just some college kid in their basement putting this together,’ Lauren McMillen said. ‘This is a real business going on, and somebody is making a lot of money off of it.’”

And the counterfeit software came from overseas:

“Part of the problem: Many of these criminals are based in China — out of reach for U.S. authorities. That's where Lauren McMillen's kit came from. After she complained, eBay ultimately gave her a refund.” 

American companies turn a profit by selling advertising to cyber criminals: 

“And some say it's not just the criminals cashing in; it's the popular sites that allow them to advertise. Tom Adams, the CEO of Rosetta Stone, said they've caught Google selling coveted top-of-the-page ad space to more than 1,600 rogue websites peddling fake Rosetta Stone. Here's how it works: You go to Google and type ‘Rosetta Stone’ into the search bar and you get a list of websites — the real one and, on the day the company showed us, many fakes offering discounts. Click on them and they look legit.”

Video of the report is here.

Currently, there is broad agreement among the technology and entertainment industries and between members of Congress and the President that additional tools are needed to target online piracy and counterfeiting.  Everyone should join in a constructive dialogue about a solution to this growing problem that is a danger to consumers and a drag on the economy.

In the aftermath of the heated debate on anti-piracy legislation, many – relieved of the polarizing climate in Washington – are now having conversations focused on the common ground that stakeholders on both sides of the issue share. Solutions-focused exchanges, like the one hosted by the Paley Center on Tuesday, exemplify this new attitude of open-dialogue and compromise. The discussion featured Fred Wilson, co-founder of Union Square Ventures, early investor in Twitter and technology industry advocate and Rick Cotton, the executive vice president and general counsel of NBC Universal.

Wilson – a frequent critic of legislation affecting the internet – gave rather unexpected comments at the event, which to some were representative of how much the conversation around piracy has progressed in just a few weeks. Wilson even pointed out that he “think[s] it’s very possible for the content industry and the internet industry to work on solutions.”

In the debate over pirated content, Wilson argued: “We know who the good guys are, who are licensed and operating legitimately.” He went so far as to suggest a “blacklist” to encourage public awareness of rogue sites profiting from illegal content. However, he also seemed to acknowledge the contentiousness of the topic he was wading into, suggesting that “Google should do this… they won’t but they should.”

As the moderator noted, search engines occupy a distinct place in the debate over rogue websites since their companies often profit from advertising which features illegal content. Wilson also surprised some in the audience when he agreed that a handful of known pirate sites should be shut down.

As CNet’s Greg Sandoval noted, in addition to his work in the tech industry, Wilson’s firm invests in legal forms of content sharing that are consistently threatened by pirated content. Sandoval writes:

“It won't come as a surprise that Wilson is sympathetic to at least some of the piracy problems that copyright owners face. His venture capital fund is invested in Turntable.fm, an online music service, and Boxee, software that enables owners to watch Web video on TVs.

“Both companies have stayed within the law and competed against companies that don't. Not having to pay to license content is a big advantage over those that do pay.” 

During the discussion, Cotton asked the audience to “take a big step back” to have a real conversation about the extent of the problem and how it harms the US.  “You have just a tidal wave of counterfeit physical products being distributed on the internet as well as stolen digital content,” Cotton shared, “so I think from the point of view of the United States –which is an advanced economy, it is a knowledge economy, it does not aspire to be a low-cost manufacturing economy – that the driving force is our invention, our innovation, technical invention, creativity…”

Cotton went on to say that ultimately, it’s in the long term national interest to come to the table and be sure that “the economic benefits of our creativity are not stolen and actually accrue to the United States.”

In the coming months, more of these discussions will take place as many stakeholders and institutions become more concerned about pirated material. After all, there appears to be clear agreement that online content theft is a problem in need of a solution.

Usually, the debate on intellectual property laws focuses on pirated movies and television shows.  This leaves out many of the 19 million Americans who rely on the intellectual property industries for their jobs.  Intellectual property laws encourage innovation and creativity.  Counterfeiting trademarked goods and pirating copyrighted content is stealing that hurts the economy.  For example, a large law enforcement operation this week illustrates the importance of trademark protection to the apparel industry and sports leagues, particularly the NFL and Super Bowl merchandise.

In response to counterfeiting of sports leagues’ clothing and merchandise, law enforcement agencies engaged in Operation Fake Sweep.  As the Associated Press reported:

“Federal officials say authorities have seized nearly $5 million worth of phony Super Bowl sportswear and merchandise in a nationwide sweep.  Officials from U.S. Immigration and Customs Enforcement and U.S. Customs and Border Protection announced the results of the four-month investigation Thursday in Indianapolis.  Agents targeted stores, flea markets and street vendors that allegedly sold counterfeit game-related sportswear.  Fake jerseys, ball caps, T-shirts, jackets and other souvenirs were among the 42,000 items confiscated in Operation Fake Sweep.  Authorities put the total take at more than $4.8 million, up from $3.7 million last year.”

This operation also targeted the copyright infringement of live sports: 

“Additionally, Yonjo Quiroa, 28, of Comstock Park, Mich., was arrested Wednesday by special agents with HSI [Immigration and Customs Enforcement’s Homeland Security Investigations].  He is charged with one count of criminal infringement of a copyright related to his operation of websites that illegally streamed live sporting event telecasts and pay-per-view events over the Internet.  Quiroa operated nine of the 16 streaming websites that were seized, and he operated them from his home in Michigan until yesterday's arrest.”

The vigorous online piracy debate produced a critical consensus: stopping foreign criminals who profit from stolen creative content and counterfeit goods on their websites is important to protecting jobs and American intellectual property. Doing nothing is an option that has been taken off the table. Each day we fail to act, American jobs are placed at risk and more consumers will face serious dangers on the Internet, including unknowingly purchasing counterfeit products.

The question now is what is the best method to target these foreign criminal websites. We believe the legislation sponsored by Senator Wyden and Representative Issa, the OPEN Act, falls significantly short in targeting foreign criminal websites in several ways. 

SEARCH ENGINES ALLOWED TO BE PORTALS TO PIRACY. The OPEN Act denies the International Trade Commission (ITC) the authority they already have today to make search engines block infringing websites. Typically, the ITC can stop infringing material from being imported to the U.S. The OPEN Act omits language that requires search engines, like Google, to block “importation” of a link to foreign rogue websites.  

IT TAKES TOO LONG TO GET TO THE CRIMINALS. The OPEN Act re-writes a bureaucratic process instead of relying on experienced enforcement by the Attorney General and U.S. Federal Courts who have been successfully moving against criminal websites for years in the U.S., without any claims of breaking the Internet. This new hurdle – going through the ITC – creates a time consuming and costly method for all copyright holders to go after foreign thieves. The ITC takes an average of 18 months before issuing a final decision in a case.

SMALL BUSINESSES & ARTISTS ARE HURT MOST. The ones who are especially hurt by this new bureaucracy: American artists and small businesses, who will not have the means to come to Washington, DC to cut through the red tape to stop these thieves from stealing their content and goods. 

IT DOES NOT PROTECT CONSUMERS. The bill does not contain language to block dangerous goods, such as counterfeit drugs, from the American marketplace. It allows criminal foreign websites to continue to be a threat to American consumers.

We applaud those leaders in Washington who have chosen to stand with the millions of hard working Americans all across this nation whose livelihoods are threatened by foreign criminal websites designed to steal. As a consequence of failing to act, there will continue to be a safe haven for foreign thieves; American jobs will continue to be lost; and consumers will continue to be exposed to fraudulent and dangerous products peddled by foreign criminals.

With today’s announcement, we hope the dynamics of the conversation can change and become a sincere discussion about how best to protect the millions of American jobs affected by the theft of American intellectual property. The threat posed by these criminal operations has been widely acknowledged by even the most ardent critics.  It is incumbent that they now sincerely work with all of us to achieve a meaningful solution to this critically important goal.

Today in the Des Moines Register, Mark Cooper, president of the South Central Iowa Federation of Labor, AFL-CIO, wrote an op-ed in support of rogue sites legislation to preserve American jobs.   These bills target crime—thieves who profit from counterfeit American goods and stolen content—and uphold free speech, while popular American websites like Wikipedia and Facebook will not be affected.

He wrote,

“Congress is considering legislation that may seem highly specialized but has the potential to help protect jobs here in Iowa, or deepen our state’s unemployment if it stalls. That’s why union leaders in Iowa and across the United States have joined the fight to win passage of the Senate’s Protect IP Act (S. 968) and the House’s Stop Online Piracy Act (SOPA, H.R. 3261), companion bills that will make it harder to steal American ideas and the jobs they create.”

This legislation is about more than pirated content.  It’s also about protecting consumers and public safety employees:

“Counterfeit products present a real harm to Iowa’s public safety employees, as well. For instance, counterfeit firefighting equipment bypasses the strong safety standards and inspections that apply to legitimate goods, posing a serious threat to public safety workers and to the people they protect.”

Today several popular websites, including the Wikipedia English language page, have blacked out their pages in opposition to the PROTECT IP Act and the Stop Online Piracy Act.  They are blocking their users while suggesting that these bills, if they become law, would truly black out their sites.

But these websites’ actions rest on the false premise that the legislation would actually target them.  Popular websites like Wikipedia, YouTube, Twitter and Facebook would not remotely qualify as the foreign rogue sites targeted by the bills. Senator Leahy and Representative Smith have issued detailed fact sheets on why these websites and social networks are not affected.  And both bills ensure that no monitoring or “policing” of users’ activity is required while respecting due process and the First Amendment.

The legislation targets criminals: foreign thieves who profit from pirated content and counterfeit goods.  These foreign rogue websites are operating freely today while legitimate American businesses are opposing legislation that would block these criminal websites from the American market.

Google has not blacked out its website but it is also protesting today.  Here are the facts about Google: it has more power than any other company or country in blocking searches or websites.  It already blocks searches in the United States without claiming censorship.  As it states on its policy blog today, “Last year alone we acted on copyright takedown notices for more than 5 million webpages.”  Google knows full well that what it already does in the U.S.—and what it would be required to do under the proposed legislation—is not “censorship.” 

The real problem is foreign rogue sites that are harmful to consumers and threaten American jobs.  Even Google and its allies in the technology community claim to agree that this is a problem.  But their actions today show they are in no hurry to fix it. 

Only days after the White House and chief sponsors of the legislation responded to the major concern expressed by opponents and then called for all parties to work cooperatively together, some technology business interests are resorting to stunts that punish their users or turn them into their corporate pawns, rather than coming to the table to find solutions to a problem that all now seem to agree is very real and damaging.

It is an irresponsible response and a disservice to people who rely on them for information and use their services. It is also an abuse of power given the freedoms these companies enjoy in the marketplace today. It’s a dangerous and troubling development when the platforms that serve as gateways to information intentionally skew the facts to incite their users in order to further their corporate interests.

A so-called “blackout” is yet another gimmick, albeit a dangerous one, designed to punish elected and administration officials who are working diligently to protect American jobs from foreign criminals. It is our hope that the White House and the Congress will call on those who intend to stage this “blackout” to stop the hyperbole and PR stunts and engage in meaningful efforts to combat piracy.