Internet Counterfeiters and Pirates Beware! Your Domain Names Are Subject to Seizure

Counterfeiting and piracy never go out of style. Fake handbags and illegal copies of first-run movies can be found on city street corners and throughout Internet websites. These illegal activities have been in the U.S. government's cross hairs of late. In addition to Congress introducing legislation designed to protect against intellectual property theft, the Department of Homeland Security's principal investigative arm, Immigration and Customs Enforcement (“ICE”), has applied pressure to Internet-era counterfeiters and pirates. Approximately one year ago, ICE launched “Operation In Our Sites” (“OIOS”) in an effort to hit counterfeiters and pirates where they live (at least, on the Internet), namely their domains. Using a mixture of intellectual property, criminal, and customs statutes, ICE has seized approximately 120 domain names. All the seized domains were allegedly involved with trademark counterfeiting and/or criminal copyright infringement. This article discusses the brief and still evolving history of OIOS, its statutory authorities, and its implications for brand and creative content owners.

Overview of OIOS Activity

As of the writing of this article, OIOS has launched five separate seizures of domains. First, in June 2010, ICE seized nine domains allegedly offering pirated copies of music, movies, and software. In November 2010, as part of its Cyber Monday crackdown, ICE cast a wider net, seizing 83 domains allegedly used in connection with the sale of counterfeit goods and pirated copyrighted works.

Two more raids followed in February 2011. In a Super Bowl-inspired seizure, ICE seized 10 domains used to illegally stream live sporting events and pay-per-view events. Then, in a nod to Valentine's Day, ICE launched “Operation Broken Hearted,” targeting 18 domains allegedly used to facilitate the sale of counterfeit handbags and similar accessories that might be gifts for Valentine's Day. Most recently, in late May 2011, ICE seized five more domains allegedly used in connection with the sale of a variety of counterfeit and pirated goods, including counterfeit golf accessories, sneakers, hats, and copyrighted films. According to Erik Barnett, assistant deputy director of the DHS, seized domains share several characteristics, including being popular and “purely violative.”

Overall, the OIOS seizures have netted 125 domains, 76 of which have since been officially forfeited to the U.S. government. Once seized, the domain no longer displays the original website. Instead, the domain links to a notice displaying the insignias of the Department of Justice, U.S. Homeland Security Investigations, and the joint task force National Intellectual Property Rights Coordination Center (“IPR Center”). Below the insignias, the web pages show a statement that the domain has been seized and a warning that copyright infringement and trafficking in counterfeit goods are crimes. For domains that have been forfeited in addition to being seized, (e.g., dvdcollects.com), OIOS provides more explicit messaging, leveraging social media to educate consumers. Those domains link to an antipiracy public service announcement on ICE's YouTube page. In the video, comedian Tom Papa acts as a street vendor passing out free copies of
illegally downloaded movies and explaining to consumers that digital piracy leads to loss of jobs.

Under the auspices of OIOS, ICE has reported to Congress that, “two individuals have been criminally charged, hundreds of thousands of dollars in illicit proceeds have been seized, and numerous criminals have been identified through investigation.” Perhaps the number of criminal indictments has been small because it is hard to locate the people behind the seized domains. ICE has noted that “[f]orfeiture is especially useful in cases where those engaged in criminal activity have been able to elude U.S. authorities. ' ” In addition, ICE notes a deterrent effect of its seizures, reporting that following the June 2010 seizures, “ ICE was notified that eighty one other sites that had been offering pirated material voluntarily stopped offering copyrighted material illegally.”

Some news reports have questioned whether a website that incorporates user-generated content is now more at risk of seizure due to the ICE seizures. It would seem, however, that if the website has a DMCA procedure and acts promptly to remove the infringing content, that should protect legitimate sites that may inadvertently have infringing materials posted by a third party. In fact, ICE is not targeting this kind of website. In statements to Congress, ICE has clarified that it is pursuing widespread criminal infringement.

Statutory Authority for Seizures

The OIOS seizures are a form of administrative or non-judicial civil forfeiture proceedings. Civil forfeiture statutes authorize the U.S. government to proceed in rem against assets involved in the commission of crimes. Administrative forfeiture is an abbreviated form of judicial civil forfeiture proceedings that, according to the DOJ's Asset Forfeiture Policy Manual, is intended to “increase the speed and efficiency of uncontested forfeiture actions.” With a few exceptions, all property subject to forfeiture may be forfeited administratively.

At the root of every seizure thus far has been an alleged violation of the criminal copyright infringement statutes (17 U.S.C. ' 506 and 18 U.S.C. ' 2319), or the statute prohibiting knowingly trafficking in counterfeit goods (18 U.S.C. ' 2320). Other criminal IP statutes, such as trafficking in counterfeit labels, can also serve as the predicate act for seizure, but have not yet factored into the OIOS seizures. ICE reports that the vast majority of the seizures related to the sale of counterfeit hard goods and a small number of the domains were offering copyrighted movies, music, or software.

Having identified domains that support trademark counterfeiting and illegal copyright infringement, ICE finds authority for its seizures and the subsequent forfeitures through the Prioritizing Resources and Organization for Intellectual Property (“PRO-IP”) Act of 2008. The PRO-IP Act strengthened criminal intellectual property laws, adding 18 U.S.C. ' 2323 that specifically authorizes civil forfeiture in cases involving violations of these criminal intellectual property infringement statutes.

Civil Forfeiture Procedures

Section 2323 of the PRO-IP Act adopts the civil forfeiture procedures spelled out in 18 U.S.C. ' 981 et seq., which in turn draw upon the U.S. Customs seizure and forfeiture provisions of Title 19. Section 2323 identifies three types of assets associated with criminal intellectual property infringements that are subject to forfeiture. In addition to the infringing goods and proceeds from criminal infringement, “[a]ny property used, or intended to be used, in any manner or part to commit or facilitate the commission” of a criminal intellectual property infringement is subject to civil forfeiture. The government must prove a substantial connection between the property and the offense. Domain names fall within this last category of forfeitable property.

An administrative forfeiture proceeding begins with the execution of a seizure warrant supported by probable cause. Under 18 U.S.C. ' 983, the seizing agency must, within 60 days, provide notice of the seizure to individuals with an interest in the seized property or take action to commence a civil judicial forfeiture proceeding and/or obtain a criminal indictment. If no such action is taken, the agency must return the property to the owner.

A person receiving a notice of seizure will typically have between 30-35 days to file a claim to recover the property. In response to a claim, the government must then either commence a judicial forfeiture proceeding, or else return the property. The filing of a claim also entitles the claimant, under ' 983(f), to petition a district court for immediate release of the seized property. A claimant must demonstrate a possessory interest in the property; that it has “sufficient ties to the community” to ensure the property will be available at the time of trial; and that the government's continued possession of the property causes a “substantial hardship” to the claimant outweighing the risk that the property will be destroyed, concealed, etc.

Challenging the ICE Seizures

In the first formal legal challenge to the ICE seizures, Puerto 80 Projects, S.L.U., a Spanish company and owner of rojadirecto.org and rojadirecta.com, petitioned the Southern District of New York on June 13, 2011 for return of its domains seized in February 2011. Puerto 80 disputed the merits of the government's claim, arguing that its sites host message forums and index links to streamed sporting events on the Internet, but do not directly host the allegedly infringing content. In addition, Puerto 80 argues that if the purpose of the seizure is to secure and preserve movable property, the seizures are not valid because the .com and .org gTLDs are maintained by registries located within the United States.

The government's reply brief, filed on July 11, 2011, argues that the seizure poses no substantial hardship for Puerto 80 since it transferred its business to other websites. (Of course, this raises the issue of the OIOS project's effectiveness.) In addition, the brief argues that release of the domain names would likely result in a return to the alleged criminal activity on the seized domains. It cites as evidence a cease and desist letter and DMCA takedown notice to which Puerto 80 did not respond.

It is important to keep in mind that ICE does not have to prove the copyright infringement in a court of law as a precursor to seizure. If it feels that criminal activity took place, the statute empowers it to seize the property to prevent future crimes. As we watch the Puerto 80 case, it will be interesting to see if any court actually engages in a fact-finding inquiry and makes a determination on the merits about whether copyright infringement existed.

OIOS: A Viable Alternative for Rights Holders?

It remains to be seen whether domain name seizures will be a mainstay in ICE's anti-counterfeiting arsenal. While rights holders have reacted positively to OIOS, the program has endured a variety of criticisms. The Electronic Frontier Foundation, a civil liberties group, has opined that the civil forfeiture procedure is a prior restraint on First Amendment rights and has asked, “[w]hat investigations didn't occur while the DHS spent its time and energy pursing the agenda of large media companies?”

In addition, members of Congress, most notably Sen. Ronald Wyden, have expressed concerns about due process. Still others have questioned the efficacy of the program since sites can resurface under different domain names if the actual criminals are not apprehended. Indeed, the government's Puerto 80 response brief acknowledges this fact pattern.

The online publication Techdirt has raised questions about ICE's understanding of the Internet technologies at issue. It has cited misstatements in an affidavit supporting a seizure warrant. In at least one case, the domain “dajaz1.com” was seized for offering copyrighted songs, but the songs were allegedly provided legally for the purpose of distribution.

Assuming the ICE seizures will withstand these criticisms and continue for the long-term, the direct benefit to individual rights holders is mixed. First, it is unclear whether ICE will move against any domain name that appears to be creating criminal activity. While a rights holder can report the intellectual property violation to the IPR Center as a starting point, that does not guarantee ICE will pursue a seizure action. Second, a movement by rights holders en masse to combat infringements through ICE is likely to create a bottleneck. ICE may move much slower than the brand owner who seeks relief pursuant to a UDRP procedure. Third, litigation may eventually force courts to address due process issues and limit the reach of ICE's seizures and forfeiture procedures.

Until the case law develops and more fact patterns emerge, the marketplace should not look at OIOS seizures as a suitable replacement for private causes of action. The most effective use of the OIOS domain name seizure procedure may be on behalf of trade associations with a common interest in shutting down the more notorious counterfeiting and piracy websites.

Kyle-Beth Hilfer, a member of this newsletter's Board of Editors, is Of Counsel to Collen IP (http://www.collenip.com/) and specializes in advertising, marketing, promotions, intellectual property and new media law. For more information about her law practice, please visit www.kbhilfer law.com. David Ewen is an associate at Collen IP.

Counterfeiting and piracy never go out of style. Fake handbags and illegal copies of first-run movies can be found on city street corners and throughout Internet websites. These illegal activities have been in the U.S. government's cross hairs of late. In addition to Congress introducing legislation designed to protect against intellectual property theft, the Department of Homeland Security's principal investigative arm, Immigration and Customs Enforcement (“ICE”), has applied pressure to Internet-era counterfeiters and pirates. Approximately one year ago, ICE launched “Operation In Our Sites” (“OIOS”) in an effort to hit counterfeiters and pirates where they live (at least, on the Internet), namely their domains. Using a mixture of intellectual property, criminal, and customs statutes, ICE has seized approximately 120 domain names. All the seized domains were allegedly involved with trademark counterfeiting and/or criminal copyright infringement. This article discusses the brief and still evolving history of OIOS, its statutory authorities, and its implications for brand and creative content owners.

Overview of OIOS Activity

As of the writing of this article, OIOS has launched five separate seizures of domains. First, in June 2010, ICE seized nine domains allegedly offering pirated copies of music, movies, and software. In November 2010, as part of its Cyber Monday crackdown, ICE cast a wider net, seizing 83 domains allegedly used in connection with the sale of counterfeit goods and pirated copyrighted works.

Two more raids followed in February 2011. In a Super Bowl-inspired seizure, ICE seized 10 domains used to illegally stream live sporting events and pay-per-view events. Then, in a nod to Valentine's Day, ICE launched “Operation Broken Hearted,” targeting 18 domains allegedly used to facilitate the sale of counterfeit handbags and similar accessories that might be gifts for Valentine's Day. Most recently, in late May 2011, ICE seized five more domains allegedly used in connection with the sale of a variety of counterfeit and pirated goods, including counterfeit golf accessories, sneakers, hats, and copyrighted films. According to Erik Barnett, assistant deputy director of the DHS, seized domains share several characteristics, including being popular and “purely violative.”

Overall, the OIOS seizures have netted 125 domains, 76 of which have since been officially forfeited to the U.S. government. Once seized, the domain no longer displays the original website. Instead, the domain links to a notice displaying the insignias of the Department of Justice, U.S. Homeland Security Investigations, and the joint task force National Intellectual Property Rights Coordination Center (“IPR Center”). Below the insignias, the web pages show a statement that the domain has been seized and a warning that copyright infringement and trafficking in counterfeit goods are crimes. For domains that have been forfeited in addition to being seized, (e.g., dvdcollects.com), OIOS provides more explicit messaging, leveraging social media to educate consumers. Those domains link to an antipiracy public service announcement on ICE's YouTube page. In the video, comedian Tom Papa acts as a street vendor passing out free copies of
illegally downloaded movies and explaining to consumers that digital piracy leads to loss of jobs.

Under the auspices of OIOS, ICE has reported to Congress that, “two individuals have been criminally charged, hundreds of thousands of dollars in illicit proceeds have been seized, and numerous criminals have been identified through investigation.” Perhaps the number of criminal indictments has been small because it is hard to locate the people behind the seized domains. ICE has noted that “[f]orfeiture is especially useful in cases where those engaged in criminal activity have been able to elude U.S. authorities. ' ” In addition, ICE notes a deterrent effect of its seizures, reporting that following the June 2010 seizures, “ ICE was notified that eighty one other sites that had been offering pirated material voluntarily stopped offering copyrighted material illegally.”

Some news reports have questioned whether a website that incorporates user-generated content is now more at risk of seizure due to the ICE seizures. It would seem, however, that if the website has a DMCA procedure and acts promptly to remove the infringing content, that should protect legitimate sites that may inadvertently have infringing materials posted by a third party. In fact, ICE is not targeting this kind of website. In statements to Congress, ICE has clarified that it is pursuing widespread criminal infringement.

Statutory Authority for Seizures

The OIOS seizures are a form of administrative or non-judicial civil forfeiture proceedings. Civil forfeiture statutes authorize the U.S. government to proceed in rem against assets involved in the commission of crimes. Administrative forfeiture is an abbreviated form of judicial civil forfeiture proceedings that, according to the DOJ's Asset Forfeiture Policy Manual, is intended to “increase the speed and efficiency of uncontested forfeiture actions.” With a few exceptions, all property subject to forfeiture may be forfeited administratively.

At the root of every seizure thus far has been an alleged violation of the criminal copyright infringement statutes (17 U.S.C. ' 506 and 18 U.S.C. ' 2319), or the statute prohibiting knowingly trafficking in counterfeit goods (18 U.S.C. ' 2320). Other criminal IP statutes, such as trafficking in counterfeit labels, can also serve as the predicate act for seizure, but have not yet factored into the OIOS seizures. ICE reports that the vast majority of the seizures related to the sale of counterfeit hard goods and a small number of the domains were offering copyrighted movies, music, or software.

Having identified domains that support trademark counterfeiting and illegal copyright infringement, ICE finds authority for its seizures and the subsequent forfeitures through the Prioritizing Resources and Organization for Intellectual Property (“PRO-IP”) Act of 2008. The PRO-IP Act strengthened criminal intellectual property laws, adding 18 U.S.C. ' 2323 that specifically authorizes civil forfeiture in cases involving violations of these criminal intellectual property infringement statutes.

Civil Forfeiture Procedures

Section 2323 of the PRO-IP Act adopts the civil forfeiture procedures spelled out in 18 U.S.C. ' 981 et seq., which in turn draw upon the U.S. Customs seizure and forfeiture provisions of Title 19. Section 2323 identifies three types of assets associated with criminal intellectual property infringements that are subject to forfeiture. In addition to the infringing goods and proceeds from criminal infringement, “[a]ny property used, or intended to be used, in any manner or part to commit or facilitate the commission” of a criminal intellectual property infringement is subject to civil forfeiture. The government must prove a substantial connection between the property and the offense. Domain names fall within this last category of forfeitable property.

An administrative forfeiture proceeding begins with the execution of a seizure warrant supported by probable cause. Under 18 U.S.C. ' 983, the seizing agency must, within 60 days, provide notice of the seizure to individuals with an interest in the seized property or take action to commence a civil judicial forfeiture proceeding and/or obtain a criminal indictment. If no such action is taken, the agency must return the property to the owner.

A person receiving a notice of seizure will typically have between 30-35 days to file a claim to recover the property. In response to a claim, the government must then either commence a judicial forfeiture proceeding, or else return the property. The filing of a claim also entitles the claimant, under ' 983(f), to petition a district court for immediate release of the seized property. A claimant must demonstrate a possessory interest in the property; that it has “sufficient ties to the community” to ensure the property will be available at the time of trial; and that the government's continued possession of the property causes a “substantial hardship” to the claimant outweighing the risk that the property will be destroyed, concealed, etc.

Challenging the ICE Seizures

In the first formal legal challenge to the ICE seizures, Puerto 80 Projects, S.L.U., a Spanish company and owner of rojadirecto.org and rojadirecta.com, petitioned the Southern District of New York on June 13, 2011 for return of its domains seized in February 2011. Puerto 80 disputed the merits of the government's claim, arguing that its sites host message forums and index links to streamed sporting events on the Internet, but do not directly host the allegedly infringing content. In addition, Puerto 80 argues that if the purpose of the seizure is to secure and preserve movable property, the seizures are not valid because the .com and .org gTLDs are maintained by registries located within the United States.

The government's reply brief, filed on July 11, 2011, argues that the seizure poses no substantial hardship for Puerto 80 since it transferred its business to other websites. (Of course, this raises the issue of the OIOS project's effectiveness.) In addition, the brief argues that release of the domain names would likely result in a return to the alleged criminal activity on the seized domains. It cites as evidence a cease and desist letter and DMCA takedown notice to which Puerto 80 did not respond.

It is important to keep in mind that ICE does not have to prove the copyright infringement in a court of law as a precursor to seizure. If it feels that criminal activity took place, the statute empowers it to seize the property to prevent future crimes. As we watch the Puerto 80 case, it will be interesting to see if any court actually engages in a fact-finding inquiry and makes a determination on the merits about whether copyright infringement existed.

OIOS: A Viable Alternative for Rights Holders?

It remains to be seen whether domain name seizures will be a mainstay in ICE's anti-counterfeiting arsenal. While rights holders have reacted positively to OIOS, the program has endured a variety of criticisms. The Electronic Frontier Foundation, a civil liberties group, has opined that the civil forfeiture procedure is a prior restraint on First Amendment rights and has asked, “[w]hat investigations didn't occur while the DHS spent its time and energy pursing the agenda of large media companies?”

In addition, members of Congress, most notably Sen. Ronald Wyden, have expressed concerns about due process. Still others have questioned the efficacy of the program since sites can resurface under different domain names if the actual criminals are not apprehended. Indeed, the government's Puerto 80 response brief acknowledges this fact pattern.

The online publication Techdirt has raised questions about ICE's understanding of the Internet technologies at issue. It has cited misstatements in an affidavit supporting a seizure warrant. In at least one case, the domain “dajaz1.com” was seized for offering copyrighted songs, but the songs were allegedly provided legally for the purpose of distribution.

Assuming the ICE seizures will withstand these criticisms and continue for the long-term, the direct benefit to individual rights holders is mixed. First, it is unclear whether ICE will move against any domain name that appears to be creating criminal activity. While a rights holder can report the intellectual property violation to the IPR Center as a starting point, that does not guarantee ICE will pursue a seizure action. Second, a movement by rights holders en masse to combat infringements through ICE is likely to create a bottleneck. ICE may move much slower than the brand owner who seeks relief pursuant to a UDRP procedure. Third, litigation may eventually force courts to address due process issues and limit the reach of ICE's seizures and forfeiture procedures.

Until the case law develops and more fact patterns emerge, the marketplace should not look at OIOS seizures as a suitable replacement for private causes of action. The most effective use of the OIOS domain name seizure procedure may be on behalf of trade associations with a common interest in shutting down the more notorious counterfeiting and piracy websites.

Kyle-Beth Hilfer, a member of this newsletter's Board of Editors, is Of Counsel to Collen IP (http://www.collenip.com/) and specializes in advertising, marketing, promotions, intellectual property and new media law. For more information about her law practice, please visit www.kbhilfer law.com. David Ewen is an associate at Collen IP.