Excerpts from media roundtable held by Rep. Bob Goodlatte (R-VA). Re: Congressional delegation trip to Europe and Russia regarding electronic commerce, the Internet, and intellectual property issues. Date: February 28, 2002. Source: Tech Law Journal transcribed from it audio recording.

Goodlatte: This is the third time that we have been authorized by the Speaker to have a Congressional delegation to Europe on issues related to electronic commerce, the Internet, intellectual property, and this time also cyber security. And, each time it has helped to build our ties with the Europeans.

As you know, there are many, many meetings with the Europeans on issues related to defense, and security, and international relations. But we have found that the Internet probably produces more issues of international discussion, other than defense and national security issues, because of the very nature of the Internet, crossing national boundaries as easily as it does. And so, each time that we go visit the European Union, and have meetings with European Commissioners, and the European Parliament, it seems as though the agenda gets longer and longer in terms of the issues that we cover.

This time we also wanted to address issues of concern with countries in Eastern Europe, particularly Russia, because, they are still really in their infancy in the Internet. But, as an economy they have cut loose. They have definitely moved in a new direction. It is sort of like having their traditional control mindset being applied to the Internet. So, the U.S. is by far the least regulatory nation with regard to the Internet that I have seen. The Europeans take a much more "regulate first and ask questions later" approach. The Russians have an even greater attitude towards not "how we can set this free to grow our economy", as "how we can control this mechanism". And that is sort of the mindset that we found there.

I was not prepared for the fifteen by fifteen foot giant screens facing out onto Red Square with television advertising of European and American products. The____ department store having Christian Dior and Calvin Klein ads in the windows facing directly across from Lenin's Tomb. There was a real split personality in Moscow. It is definitely booming -- the lit up city at night, and so on, is very much like other European cities. But it is like a country with one foot in an old army boot stuck in the mud, and the other foot in a Nike running show ready to take off. And if the government would simply cut them loose, and give up some of their old ideas, we would very much succeed in that direction.

One of the issues we encountered is something that we faced here about four or five years ago, and that is the government's effort to control communications on the Internet, to have a back door key into people's computer programs and their communications. It is just sort of like they are even further down the path of wanting to try to control that than the U.S. government was. Many years behind most western European countries, and the United States, have abandoned the idea of having a mandatory key escrow or key recovery system.

Even after September 11, with the PATRIOT Act, the administration did not put forward a proposal for key escrow or key recovery. That may in part be do to the fact that Attorney General Ashcroft was the leading proponent of the legislation in the Senate that I was promoting in the House, which garnered a tremendous amount of support here and wound up resulting in the administration doing an almost one hundred and eighty degree reversal of their position on their issue of government control of encryption. They basically backed away from it and allowed U.S. companies to get into the international marketplace, sell their strongly encrypted products in other countries around the world, because other countries' products were being sold in the United States.

Now we show up in Moscow and find companies like Oracle and Microsoft confronting exactly the same problem there -- a government intending to move forward on a key escrow or key recovery type of system. And, so we hope we made some progress in suggesting to them that this type of system would not work, that it would have an effect of hindering people's ability to use the Internet securely, willingness to use the Internet, willingness of foreign companies to do business in Russia, and that would hinder the overall growth of the Internet in Russia, which is starting to grow.

There is still only a small percentage, somewhere between five and ten percent of Russian citizens, who have access to the Internet in their homes, and perhaps, twenty percent collectively between homes, workplaces, and libraries, have some form of access to the Internet. But, it is still very, very low compared to the Western European standards. And that is low compared to the United States. We think that these kinds of problems are rather serious. The ministers that we spoke to expressed some open mindedness, but I can't really tell what impact it will have because we don't know how that will be translated in their policy decisions.

I met with Minister Leonid Reiman, who is the Minister of Communications and Information, and Herman Greff, who is the Minister of Development and Trade. And, we also met with some key Committee members of the Russian Duma, and then the higher body in Russia, the equivalent of the Senate there, is Federal Council. And, we met with the Chairman of the Committee on Foreign Affairs there, and the Deputy Chairman of the Federation Council.

The other issue that we raised with them, was first raised with us when we arrived. The U.S. Chargé in Moscow, the second in command at our embassy, gave us a briefing on issues in Moscow. When he showed up at the meeting he brought with him a copy Microsoft's Windows XP that he had purchased two blocks from the hotel where he met with us, for $2.80. If you are familiar with that, the full version of that sells for about $300 in the United States.

And so that lead to another issue that we wanted to press very strongly with them. And that was, of course, intellectual property piracy of all kinds. There are very serious problems with that. You can readily see it. It is not unique to Russia. If you go to Chinatown in New York City, you will find some of the same products for sale. But in the U.S. there is a much more aggressive effort to crack down on it. In Russia, it seems to be a problem with corruption to which the government seems to turn its head. Sometimes it doesn't take steps. I know that Microsoft, for example, had an office in Russia. It closed the office about a year ago because of their frustration in terms of attempting to combat this.

The Motion Picture Association is being more aggressive. They have a separate entity in Russia that is working with them to try to protect their copyrighted materials. But their biggest complaint is that when they identify people who are committing acts of piracy -- we are not talking about someone who makes a few copies -- we are talking about factories making products, or warehouses distributing pirated products, not being able to -- when they notify authorities, they are usually not getting an effective response. And they attribute that to corruption.

So, we raised these issues with them, from the standpoint not only of it being a concern of the U.S. companies, but really, another hindrance to the ability of Russia to grow their economy in the direction that I presume they want to grow it. They certainly expressed a lot of interest in information technology and growing the Internet and so on. But, the point that we made to them was that, unless you protect intellectual property, people will not create intellectual property in Russia.

And it is a country that is filled with people who have very strong backgrounds in math and sciences. Instead of being hackers and so on, they ought to be computer software engineers providing services to other countries. India has grown a great market of providing basically after hours support, while the U.S. is down, they can service during the daylight hours U.S. businesses. We saw some examples of that in Germany, where we visited eBay's German offices. And one of the things that they do there is to cover part of the what they call the graveyard shift on eBay. Instead of having U.S. workers working in the middle of the night, they have daytime workers at eBay Germany, where they have about three hundred employees working on handling customer inquiries and complaints and so on.

Well, the Russians would be well suited to provide some of those services as well. And, they also have some companies in their infancy creating computer software, programming, and other types of things. But they don't have a tradition of protecting intellectual property. These companies will never get off the ground because their products will be ripped off by their own citizenry. And, I think that concept was well received. But, we still have not seen much evidence that they are doing a whole lot. In fact, some of the companies that we talked to expressed the concern that more was being done about a year ago. It is backsliding in that regard.

We talked a lot about WTO accession in the Czech Republic, and in Brussels.

[discussion with staff member]

And we raised these issues with them in that context as well, particularly --

[discussion with staff member]

I, Congressman Boucher, raised the issue with members of the Russian Ministry, particularly Minister Greff. In terms of, one of the important considerations for their joining the WTO is going to be their efforts to deal with piracy.

Question and Answer Session

[Question regarding piracy in the Czech Republic.]

Goodlatte: It is still a problem there. And I think that it is sort of like the further east that you go the greater the problem is. And so, compared to western Europe, ...

In the Czech Republic I think they have made a lot of progress in terms of their accession to the European Union. You know, they have to adopt like seventy thousand pages worth of laws, or have their laws at least compatible with those laws.

...

[Question regarding broadband.]

Goodlatte: We did. We discussed broadband more in western Europe: Berlin, and Brussels. At Brussels we had meetings with some members of the European Commission, particularly Commissioner Liikinen from Finland whose main responsibility is the information society. It is hard to match up our cabinet positions with their commission members. But, we had discussions with him with regard to that. Also, about privacy, about the progress being made in safe harbor provisions. ...

A lot of U.S. companies have now signed up and a report was just released that indicated that there was, I guess, more satisfaction than dissatisfaction, [not?] a blanket endorsement of the system, but it has worked, and continues to work, to bridge the significant divide between Europe and the United States in how to handle the privacy, particularly over the opt out versus the opt in approach. There are very strongly opt in. We are very pretty strongly in the direction of opt out, with the exception of a few more sensitive areas, like medical, financial.

[Follow up question on privacy.]

Goodlatte: Well, I don't think most people would want to opt out. ... Opting in means use my information in ways that you disclose to me, and use it so that you can make me aware of other opportunities.

... We basically agreed to continue to work on the safe harbor provisions, because we are nowhere near seeing the United States go for opt in, and I don't see them coming around and changing what they have already put in place.

Ironically, U.S. companies that operate on the opt out basis have better privacy disclosure rules -- studies have consistently shown this -- than the European companies that are supposedly under these very strict directives. The last study I saw showed that only 50% of European companies were in compliance with the standard of disclosure, and having set policies that allowed the consumer to take control of it, and decide if they wanted to opt out or not ...

Basically, in one sentence, we don't want to take the information out of the information age. If you can't understand who your customer is, and then provide them with information that is useful to them, in ways that the Internet and computers are far more capable of doing than direct mail or television or telephone calls, or all of the other intrusive ways that people have calling you up and offering you information.

You are going to get more -- the percentage of the time that the information you get on the Internet is going to be useful to you is far higher than it is in all of these other areas. Now, I agree with those who want to have a privacy policy that is consistent across the board. I don't think we will go to the level of saying you can't mail fliers to people in the mail offering them those opportunities, unless they opt in to receive those. It is an opt out system. ... So, we are trying to keep that same thing open on the Internet. Well, we think that the information will be less intrusive, more easily disposed of if you don't want it, and more useful to you, because it is more likely to be more targeted to the things that you are actually interested in.

[Question regarding unsolicited e-mail.]

With regard to spam ... What we want to do is to prevent people from misusing that information, or using it when you do attempt to opt out. And that is what is the spam bill I have, as opposed to the one that Heather Wilson has. But, it is still all pointed towards giving the power to opt out, rather than saying you can't use spam in the first place.

...

[Question regarding broadband.]

Goodlatte: [discussion of broadband deployment, and the Tauzin Dingell bill.] ...

You don't often see the U.S. government say "well, here it is, our overall economic project, to grow this industry", or whatever. We let the market forces, including forces from outside the country, come in and play. And, sometimes they have a pretty heavy impact that we would just as soon not see. But, overall, I think we have benefited from that attitude, because it has stimulated world leadership in the technology sector, in the biomedical sector. All of the new cutting edge areas of economic growth areas that you can look at, as far as I can see, the U.S. is the leader, or a leader in that area, without having that kind of "let's wait for the government to tell us what is a great thing to do". And I think that is really true of a lot of issues.

Privacy is another one where we basically say "well, let's find out what the real problems are" and have governments step in and deal with those abuses, rather than come up with a whole privacy framework, and then try to have industry fit into that framework, and make it work. We have had over the years many many discussions with them about them about what constitutes caching. Are you violating somebody's privacy by storing temporarily the information about where they went. Are you violating somebody's copyright by doing that. We have been, by taking a less regulation is better approach, allowed it to grow. Sometimes it grows in areas that we just as soon it didn't. Have to come back in to reign it in. I am not an advocate for no regulation of the Internet. But, I think, the deregulatory approach that we take here, and the less regulatory approach we take here, in my opinion, better, than the approach they take there.

The same thing has been true in the area of wireless Internet growth, and wireless telecommunications in general. They actually got a jump on us by rolling out 3G technology sooner than we did. But, because the government took a leading role in picking the technology that was going to work, they are now finding that it is not the best technology. And the U.S., which is behind, because we don't have access to as much spectrum, seems to be developing better technology. There was an interesting article in the Wall Street Journal about that, about a week or so ago. ...

And here again, the problem that we have with roll out on that is government. Government, particularly, in this case, the Defense Department and other governmental sectors, they control big chunks of wireless spectrum. ... The Europeans had more spectrum available because they had less defense and security uses and needs for it. But, because government is a little bit too much dictating how they use it, they got a lead, but may be frittering the advantage away. And, we may catch up with them, if we can free up that spectrum, to apply this better technology.

... The big problem that I see right now is getting the spectrum to deploy it.

[Question regarding value added taxes.]

Goodlatte: As you know, we have taken a pretty strong position about keeping down all kinds of taxes that are proposed on the Internet. We succeeded in extending for another two years the so called new and discriminatory taxes from being imposed, Internet access charges, and so on. And, have delayed any decision about how to deal with the sales tax issues. In Europe they are much more strongly "well, obviously, we are going to apply taxes to the Internet". And, they have systems set up where it is fairly easy to attach it to most forms of e-commerce, because you buy something for somebody outside the country, when it hits the border, they are going to apply a value added tax.

Their problem arises when it comes to companies that are piping in intellectual property using motion pictures, software, whatever the case might be. And they have moved closer and closer to a mechanism by which -- the Parliament has now adopted a system which imposes taxes on online transactions on the Internet. The problem is that it is discriminatory against U.S. companies. ... Well, basically, what we expressed to them was our first preference would be to delay the implementation of this until you get with a non discriminatory system. The second preference was to suggest to them that there were ways to be non discriminatory, such as having one rate for cross border transactions, not the system they have of imposing the tax on the business where it is located, which is great for companies in Europe. But, for the U.S., they have done the opposite. ...