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I am delighted to be here with you today to speak to give you the perspective of an American prosecutor about threats to privacy and intellectual property rights, specifically as they apply to peer-to-peer sharing over the Internet.

For almost 100 years, the United States has recognized a limited, though important, role for the criminal law enforcement with regard to intellectual property rights. The vast majority of intellectual property rights enforcement in the United States has always been, and should remain, civil in nature. For the most part, property rights holders are capable of enforcing their intellectual property rights through civil law suits, and law enforcement authorities must be careful about how they utilize scarce resources in the post-September 11th era. However, where the level of piracy is particularly egregious, where public health and safety are put at risk, or where civil remedies fail to adequately deter illegal conduct, we believe that criminal enforcement to protect intellectual property rights is appropriate.

For example, a few years ago a man was prosecuted, convicted, and sentenced to 2 years in prison for selling counterfeit luxury items, including fake Rolex watches and designer handbags. Before the United States prosecuted him, this man continued his illegal trade despite numerous civil suits resulting in almost 16 million dollars in civil judgments against him. Undeterred, by these civil judgments, this individual would simply move his operation to another state and continue his illegal activity.

Over the past two years, the Department of Justice has waged the most aggressive campaign against counterfeiting and piracy in its history. We have made significant inroads into the emerging area of online piracy, which has grown precipitously in lockstep with the phenomenal growth of the Internet, file compression technology and broadband web access. We have successfully targeted some of the most egregious online offenders - the international organizations that compete with each other to place the latest, hardest to obtain, and highest quality pirated products on the Internet. These so-called "warez groups" are highly sophisticated organizations, responsible for introducing many of the pirated works that ultimately filter their way down to lower levels of the online distribution chain - such as peer-to-peer. Working in cooperation with law enforcement counterparts overseas, our collective efforts, which are ongoing, have dismantled many of the most prominent warez groups, and resulted in substantial prison sentences ranging from 33 to 47 months for the core conspirators.

The Department of Justice believes that protecting intellectual property rights is important. IP industries represent a vital sector of the American economic engine. IP industries contribute approximately 5% to our Gross Domestic Product, having more than doubled in size in the last 25 years. These companies employ millions of people in high-paying jobs. Much of this growth is due to overseas demand for the products that IP industries produce. The Business Software Alliance estimates that United States software industry supplies 70% of the world's demand for legitimate software products. The American movie industry has a positive trade balance with every other nation around the world. American music and games continue to be as popular abroad as they are at home. Indeed, it would be difficult to overstate the importance of intellectual property rights to the continued economic well-being of the United States.

As well, on the positive side, the Internet and other technologies such as peer-to-peer provide copyright owners with unprecedented opportunities to distribute their copyrighted works to a worldwide audience. Unfortunately, these same technologies that provide the benefits of increased public exposure and access to copyrighted works also have a down side–they have greatly expanded the opportunity to commit piracy and widespread copyright infringement. Millions of copyrighted songs and hundreds of thousands of copyrighted movies are illegally copied every day. The losses to those who create software and games from illegal copying are also significant.

Don't misunderstand me. We at the Department of Justice firmly believe in the benefits of the Internet. Indeed, the benefits of this technology, which include providing worldwide access to a highly diverse network of educational and cultural content, are too numerous and obvious to mention, and we are cognizant of that fact that we need to be careful that our law enforcement efforts do not unduly interfere with or stifle the development of the Internet. Nonetheless, we do not believe, as others do, that new technologies, including the Internet, should be exempted from existing laws and societal norms simply because they are novel or easy to use.

It is increasingly apparent that many view copyright piracy taking place over P2P networks as somehow different from more traditional violations of intellectual property rights. It is estimated that over 50 million Americans have downloaded or shared files via P2P, and that about 5 million of them are doing it on any given day. Recent studies indicate that approximately two-thirds of those who download music and movies and one-half of those who upload music and movies don't care at all about the fact that the material they are copying and distributing is copyrighted and that they haven't paid for it.

If someone was arrested smuggling 500,000 copies of a pirated music CD into the United States, nobody would think there was anything wrong if that person was criminally prosecuted by federal authorities or civilly sued by the copyright holder. Yet if that same rights holder provided definitive evidence that 500,000 copies of the same CD were available, free of charge, online, the public response would be decidedly different and less sympathetic. I find this difference in attitude to be both striking and troubling.

Some argue that the huge proliferation of unlicensed distribution of copyrighted material over peer-to-peer networks is due to industry's failure to utilize this technology and respond to the desires of customers. If peer-to-peer is, as some suggest, the most effective delivery system for digital content ever, why aren't the entertainment and software industries availing themselves of it? Why haven't music companies, for example, made individual songs available on an a la carte, reasonably-priced, basis?

Perhaps there is something to this argument. After all, the content industries seem to have acknowledged that they have been slow to respond to technology, but they contend that progress is now being made. For example, iTunes Music Store and Pressplay are two legitimate online music services that have garnered recent attention. So, while it may not be as fast as some might like, rights holders are now making content available in a wide range of convenient, affordable media.

However, even if you accept as fact the allegation that legitimate alternatives are not coming fast enough, does that mean we, the public, can take whatever we want, whenever we want it without paying for it just because we now have the means to do so? Imagine the results if we were to apply such reasoning to other products: if I think the price of gasoline is too high, would I be justified in stopping to fill the tank of my car and then driving off without paying? If I think the price of cheese is too high due to tariffs or subsidies to producers, would I be justified in taking what I want without paying for it merely by stating that the producers are all wealthy and won't miss what I took? So far as I can recall, we have never condoned the behavior of somebody who says, "I thought your property was overpriced and I thought you were wealthy enough already, so I just took your property without paying for it."

Such logic turns the concept of intellectual property on its head. At the heart of modern copyright laws is the idea that by granting authors a limited monopoly in their works, allowing them, for the most part, to determine how their works can be sold or utilized for a limited time, we ensure that there are sufficient economic incentives in place for authors, performers, and others to encourage them to create. We all wish that the products we enjoy were cheaper and more accessible, but simply because they are not as cheap or accessible as we may wish does not mean that there has been a market failure, nor does it give us the right to take those same products for free simply because we can. While there are many reasons offered by those who choose to infringe copyrighted works - it's easy to do, it's free, it's unlikely that I'll be caught, I think that most of the people who create these works are already rich - none of these reasons in my opinion justifies the near-total erosion of intellectual property rights we are currently seeing on P2P networks.

In addition to posing a serious threat to intellectual property rights, peer-to-peer networks also pose certain real threats to the privacy of citizens who utilize them. The first threat to privacy that I would like to discuss may not, at first glance, seem like a privacy interest at all, although I believe it is. Specifically, I am referring to the ability of parents to protect their children from harmful and offensive content.

Anyone who has ever been on a peer-to-peer network knows that they are used to disseminate massive amounts of adult and child pornography. Finding content on P2P systems is generally done by searching for file names - the name of a song, or artist, or the name of a movie, for example. Some people seeking to spread pornographic images across P2P networks exploit these systems by misnaming their pornographic files. Thus, any child who downloads P2P software and enters an innocuous search term, such as "Britney Spears," "Pokemon," "water sports," or "boy scouts," may be confronted with objectionable material. Parents should not assume that just because their child is in the privacy of their home using a computer, that they are safe from harmful or illegal activity. This has always been true of the Internet, and it is certainly true of P2P today. On a positive note, most P2P software packages contain filters that can be activated to screen out adult material and/or digital images, and many of these filters are password protected, so that children cannot deactivate filters that their parents have activated.

A second category of privacy risks associated with P2P systems involves the security of a user's personal data against hackers and other outside intruders. In order for a P2P network to function as designed, a P2P user must open up his or her computer to the outside world. This is not, however, a riskless undertaking. By installing peer-to-peer software, users may inadvertently or through inattention expose themselves to the risk of worms, viruses, so-called "Trojan horses," and various types of "malware," such as spyware and adware, which can be installed without the user's knowledge and which can be used to monitor the user's web browsing activities, collect personal and private data about the user, such as medical and financial records or privileged or intimate communications, or for other malicious purposes such as disabling your computer or spreading worms and viruses to others.

As we move toward a paperless society, people increasingly store vital, private information on their computers. P2P users need to fully understand the risk to such information when using file sharing programs.

In addition to the security and privacy risks I have already mentioned, P2P users who are sharing copyrighted materials or engaging in other illegal conduct online face the possibility that their actions will be detected by copyright owners seeking to enforce their copyrights, or by law enforcement authorities investigating violations of criminal laws. The reality of this technology is that by opening up their computers and engaging in P2P filesharing, users surrender some degree of privacy in their computer systems by potentially disclosing the types of files that are on their computers as well as their Internet Protocol addresses during the filesharing transaction. When filesharers use P2P systems to distribute copyrighted materials or engage in other unlawful activity, they should realize that the law will not protect their anonymity.

When a copyright owner observes a P2P user distributing their copyrighted materials illegally, the copyright owner can obtain that P2P user's name and address through a streamlined subpoena process pursuant to the Digital Millennium Copyright Act, and proceed with legal action against that user. Although I recognize that this portion of the DMCA is currently being challenged by Verizon, among others, I simply wish to point out that P2P users who are illegally sharing copyrighted materials on the Internet are perhaps not so anonymous as they might imagine themselves to be, as over 250 P2P users who were recently sued by the Recording Industry Association of America can attest. Similarly, federal law enforcement authorites have the ability to pierce the perceived anonymity of filesharers who engage in illegal conduct.

I do not mean to suggest that P2P users – even those P2P users who distribute materials illegally – forfeit all of their privacy rights. On the contrary, the United States maintains strong legal protections for the privacy of Internet users. In all but the most dire emergencies, obtaining a user's identity from a service provider requires a subpoena or a court order. Monitoring private online communications or obtaining email stored on a target's computer requires court approval. In some cases US law actually makes it more difficult for law enforcement to obtain user records than for private entities to obtain the same information. For example, an ISP may voluntarily choose to disclose customer or subscriber records to a private individual or company, but generally may not disclose those same records to the government unless pursuant to subpoena or court order.

My point here is that when P2P users make infringing files available to the world on a P2P network or when they engage in other illegal conduct over that network, they cannot complain when the rightful copyright owner or law enforcement authorities discover it. Despite the complex legal framework by which we in law enforcement must abide when seeking evidence online, when P2P users commit crimes, we can and will obtain the legal process necessary to investigate these crimes. In short, P2P users risk their own privacy when they utilize these services, which make their conduct visible to the public, for unlawful purposes.

In conclusion, let me state that it is imperative that all Internet users, including P2P users, understand the privacy risks inherent in using these technologies. They must also understand that their privacy is placed at risk from many different sources - including their own decision to make available to the public files that infringe upon the intellectual property rights of others. I would like to thank you for inviting me to be here with you today, and look forward to answering your questions.

• More informtaion on: Protecting Intellectual Property Rights
• More information on: Intellectual Property Crime Cases
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