U.S. online piracy bill headed for major makeover

(Reuters) - U.S. legislation aimed at curbing online piracy, which had appeared to be on a fast track for approval by Congress, appears likely to be scaled back or jettisoned entirely in the wake of critical comments over the weekend from the White House, people familiar with the matter said.

The legislation, known as SOPA in the House of Representatives and PIPA in the Senate, has been a major priority for entertainment companies, publishers, pharmaceutical firms and many industry groups, who say it is critical to curbing online piracy that costs them billions of dollars a year.

The legislation is designed to shut down access to overseas websites that traffic in stolen content or counterfeit goods.

Internet companies have furiously opposed the legislation and have ramped up their lobbying efforts in recent months, arguing the legislation would undermine innovation and free speech rights and compromise the functioning of the Internet.

Some Internet advocates have called for a boycott of any companies that support the legislation, and several popular websites, including community-edited encyclopedia Wikipedia and the social media site Reddit, have vowed to black out their sites this Wednesday in protest.

With public sentiment on the bill shifting in recent weeks and an implicit veto threat now emerging from the White House, Congressional staffers are resigning themselves to writing replacement language or possibly entirely new bills.

The White House said in a blog post over the weekend that it wouldn't support "legislation that reduces freedom of expression, increases cybersecurity risk, or undermines the dynamic, innovative global Internet."

Three key section of the existing legislation seem likely to remain, a person familiar with the matter says. They comprise provisions aimed at getting search engines to disable links to foreign infringing sites; provisions that cut off advertising services to those sites; and provisions that cut off payment processing.

But critical provisions that would require Internet service providers such as Verizon Communications (VZ.N) and Comcast Corp. (CMCSA.O) to cut off infringing sites through a technology known as DNS blocking are now likely to be eliminated.

Critics have said that such measures would only encourage people to navigate the web in riskier ways, with modified browsers or other tweaks that could lead to their Internet sessions getting hijacked by scammers.

Lawmakers had already been coming around to the realization they would have to hold back on the DNS-blocking provisions.

Before the holidays, an amended version of the House bill had added a "kill switch," or provision that service providers wouldn't have to block a site if it did "impair the security or integrity of the system."

On Thursday, Senator Patrick Leahy, who is sponsoring the Senate bill, said he planned to propose amending it so that the ramifications of blocking access to a site be studied before implementation.

On Friday, Representative Lamar Smith, who is sponsoring the House bill, said he planned to remove altogether the provision that would require service providers to block access to infringing foreign websites.

A Google (GOOG.O) official said in Congressional testimony in November that the company did not necessarily oppose disabling search engine links and cutting off advertising.

But it is not clear if eliminating the DNS-blocking provisions alone will be enough to mollify critics.

"Like many other tech companies, we believe that there are smart, targeted ways to shut down foreign rogue websites without asking U.S. companies to censor the Internet," a Google spokeswoman told Reuters on Monday.

In addition to concerns about the technical ramifications of DNS blocking and the practical issues associated with disabling services to individual websites, many in the Internet business fear the bills create far too much leeway to shut down websites without sufficient due process.

But supporters of the legislation are just as adamant that something needs to be done. Over the weekend, News Corp. (NWSA.O) chief Rupert Murdoch, whose holdings include Fox, complained that the White House had caved.

"So Obama has thrown in his lot with Silicon Valley paymasters who threaten all software creators with piracy, plain thievery," News Corp's chairman and chief executive officer posted on his personal Twitter account on Saturday."

The debate seems likely to intensify in the coming weeks. The White House said it would soon host a conference call among opponents of the existing bill.

(Reporting by Sarah McBride in San Francisco; Additional reporting by Ilaina Jones; Editing by Jonathan Weber and Sandra Maler)