• by Wendy Davis  @wendyndavis, June 24, 2011

A pending bill aimed at curbing online piracy would "put American innovators and investors at a clear disadvantage in the global economy," a coalition of venture capitalists and Internet experts warned this week.

The Protect IP Act (S. 968) "is ripe for abuse," they say in a letter to Congress. "It allows rights-holders to require third-parties to block access to and take away revenues sources for online services, with limited oversight and due process." The letter was signed by more than 50 executives, including Marc Andreessen of Andreessen Horowitz, Esther Dyson of EDventure Holdings and Fred Wilson of Union Square Ventures.

The bill, which unanimously cleared the Senate Judiciary Committee, targets sites "dedicated to infringing activities." The measure enables the Department of Justice to obtain orders prohibiting Internet service providers from putting through traffic to those sites' URLs.

Web users, however, could still reach the sites by typing in their numerical addresses. The Protect IP Act also provides for court orders forcing Google, Bing and other search engines to stop returning certain results.

Hollywood is backing the bill, while digital rights groups and others, including The New York Times and Los Angeles Times, oppose it. Sen. Ron Wyden (D-Ore.) put a "hold" on the measure shortly after it passed the Judiciary Committee, but the bill could still theoretically be enacted.

Andreessen and the other signatories argue that the law would give foreign search engines and social networks an advantage over U.S. companies: "Determined users who want to find blocked content will simply shift to services outside the reach of U.S. law."

The venture capitalists also say that measure would "undermine the delicate balance" created by the Digital Millennium Copyright Act. That law contains safe harbors providing that search engines and other intermediaries are immune from liability for copyright infringement as long as they take down pirated material upon request of the owner.

Google's YouTube defeated a copyright infringement lawsuit by Viacom because the video-sharing site was able to show that it qualified for the DMCA safe harbors. Viacom appealed that decision to the Second Circuit, which is slated to hear arguments in September.

The National Venture Capital Association filed a friend-of-the-court brief in that matter as well, arguing that the lawsuit was correctly decided in Google's favor. "The imposition of copyright liability on YouTube would discourage innovation and investment in Internet-based businesses," the organization wrote in that case.