Chairman Smith:

 

You have chosen an important issue for your first hearing as Chairman of the Subcommittee. It is a good sign that you will focus the Subcommittee on interesting and relevant issues during your tenure.

 

Copyright piracy on P2P networks like Kazaa and Morpheus is a huge problem. P2P networks are responsible for approximately 2.5 billion downloads per month. On FastTrack-based P2P networks alone, an estimated 3 to 5 million computers are making between 700 and 900 million files available for download at any given moment.

 

There is no doubt that the vast majority of these P2P uploads and downloads constitute copyright infringement. Music, movie, and television programs constitute an estimated 89% of the files on P2P networks. As the 9th Circuit clearly held in the Napster case, the unauthorized distribution and reproduction of copyrighted works by total strangers through a public P2P network is copyright infringement pure and simple.

 

As the 9th Circuit also held, no colorable claim of fair use excuses these infringements. The attempt to make such an excuse not only ignores the reality of the theft, but is an insult to creators. It is the copyright owner's right, not a pirate's, to choose whether to distribute a copyrighted work through a P2P system. If the copyright owner wants to use P2P to distribute his work, that's great. If not, the owner has the right to refuse.

 

The argument about the propriety of illegal P2P file trafficking should end there, but some try to further excuse this theft. They make patronizing assertions that copyright owners actually benefit from this massive theft, and thus should welcome the usurpation of their property rights.

 

The truth, of course, is that P2P file trafficking causes great harm to copyright owners. General economic indicators show the extent of harm. Revenues from sales of music CDs plummeted 20% over 2001 and 2002, and the sales numbers for January 2003 indicate more of the same. These sales declines cannot be explained away as reflections of the general economic downturn from 2000 to present. Economist Harold Vogel has charted a rapid decline in unit sales of CDs since 1999 - well before the economic downturn - and notes that this decline corresponds directly with the introduction of Napster.

 

The impact on individual creators is also real. As I have noted before, each illegal P2P download of a copyrighted song robs a songwriter of 8 cents. Those 8 cents multiplied by the billions of P2P downloads would mean a new life for the vast majority of songwriters who earn less than $20,000 in royalties. Similarly, illegal P2P downloads of television programs destroy the syndication market upon which the hopes of so many directors, writers, and actors hinge.

 

Unfortunately, colleges play a prominent role in contributing to P2P piracy. A recent study showed that "sixteen percent of all the files available at any given moment on the FastTrack network are located at IP addresses managed by U.S. educational institutions." This means that educational institutions are offering between 111 and 142 million mostly-infringing files to the universe of P2P users at any given time.

 

It is imperative that colleges work with copyright owners to stem the flood of P2P piracy through their computer networks.

 

As Jack Valenti pointed out in a recent speech at Duke University, colleges are in the business of creating upstanding citizens who will respect the American moral compact. To create such citizens, colleges must teach by example, and that example can't be adherence to the credo of "Do it if you can get away with it."

 

Furthermore, colleges cannot expect Congress to continuously help them on intellectual property issues if they do not act as responsible members of the intellectual property system. From laws facilitating technology transfer to those enabling distance education, Congress has willingly helped colleges protect or use intellectual property. As with the collaborative research legislation we may take up later this year, I expect that Congress will continue to provide such assistance. However, the willingness of Congress to address these issues will wane if colleges ignore the massive P2P piracy occurring on their systems.

 

Furthermore, their own self-interest dictates that colleges take action to deal with P2P piracy. Bandwidth, security, and privacy concerns require colleges to get the problem in hand.

P2P piracy consumes an enormous amount of college bandwidth, and as a result, increases bandwidth costs while draining the resources available for research and academic pursuits. 88% of Residence Hall networks at the University of Indiana were at one time consumed with P2P file-trafficking. When Texas Christian University blocked Napster, it freed up 70% of its bandwidth.

Freeing up network bandwidth by blocking illegal P2P file-trafficking has saved colleges significant sums. Kansas State estimated that it saved more than $100,000, or a quarter of its bandwidth costs. In a time of shrinking school budgets, these savings are significant.

 

Security concerns should also lead colleges to stop P2P piracy through their networks. As Professor John Hale will testify, FastTrack and Gnutella, the two most popular P2P protocols, enable the transfer of viruses, the implanting of malicious computer programs like spyware, and "tunneling" through network firewalls and filters. Once the networks have been breached, sensitive information can be stolen or corrupted, critical university computer systems can be crashed, and university computers can be "enslaved" to carry out Denial of Service attacks. It is these very security concerns that led the House, Senate, and U.S. Courts to disable the use of popular P2P networks on their respective computer systems.

 

Concerns regarding the privacy implications of P2P networks are also quite real. As documented in the White Paper submitted by Professor Hale and in a separate study by Hewlett-Packard, P2P network users often expose their most private information and correspondences to the whole P2P network. Unwittingly, P2P users frequently allow their credit card numbers, email inboxes, and even tax information to be shared with other P2P users.

 

Piracy apologists like to argue that stopping P2P piracy somehow impinges on the privacy of file-traffickers. As the Hale and H-P studies show, it is participation in file-trafficking itself threatens the privacy of file-traffickers. Thus, colleges concerned with the privacy of their students and other members of the college community should act to stop P2P piracy, not allow it to flourish.

I understand that I may be preaching to the choir here. The schools represented by our witnesses today have all taken dramatic steps to stop P2P piracy from occurring on their networks. Your schools, and you yourselves, are to be commended for acting in enlightened self-interest. Rather than preaching to you, I mean to encourage other colleges to follow your lead.

 

I am heartened to hear that a group of colleges are meeting with copyright owners to discuss ways to address P2P piracy on campus. In particular, I am most interested in your efforts to craft a model policy for best practices that colleges should adopt to address P2P piracy. Widespread adoption of such best practices, and the self-regulation model they represent, is far preferable to a legislative mandate of such standards.

 

It seems critical that you develop this best practices model with all speed, so that colleges across the country can implement them before the P2P piracy problem spirals further out of control. I hope you will keep this Subcommittee appraised of your progress in this area, and of subsequent progress with implementation.

 

Thank you, Mr. Chairman, and I yield back the balance of my time.