WASHINGTON -- Yielding to a massive campaign by Internet services and their millions of users, Congress decided Friday to indefinitely postpone legislation to stop online piracy of movies and music that costs U.S. companies billions of dollars every year.
Critics said the bills would result in censorship and stifle Internet innovation.
The demise, at least for now, of the anti-piracy bills was a victory for Silicon Valley over Hollywood, which has campaigned for a tougher response to online piracy. Congress' qualms underscored how Internet users can use their might to block those who want to change the system.
The battle over the Internet also played out on a different front late Thursday when a loose affiliation of hackers known as "Anonymous" shut down Justice Department Web sites for several hours and hacked the site of the Motion Picture Association of America after federal officials issued an indictment against Megaupload.com, one of the biggest file-sharing sites.
The site of the Hong Kong-based company was shut down, and the founder and three employees were arrested in New Zealand on U.S. accusations that they facilitated millions of illegal downloads of music and other content.
New Zealand police raided homes and businesses linked to founder Kim Dotcom, formerly known as Kim Schmitz, on Friday and seized guns, millions of dollars, and nearly $5 million in luxury cars.
Megaupload.com's offerings were a virtual bazaar of what the Internet has to offer, including illegally copied video games, films, and TV programs, federal officials said.
In some cases, movies could be seen before they were released in theaters.
Investigators say Megaupload's executives made more than $175 million through subscription fees and online ads while robbing authors, movie producers, and other copyright holders of more than $500 million.
"This action is among the largest criminal copyright cases ever brought by the United States," the Justice Department and FBI said.
In the United States, momentum against the Senate's Protect Intellectual Property Act and the House's Stop Online Piracy Act grew on Wednesday when the online encyclopedia Wikipedia and other Web giants staged a one-day blackout and Google organized a petition drive that drew 7 million participants.
That day alone, at least six senators who had co-sponsored the Senate legislation reversed their positions.
House Speaker John Boehner (R., Ohio) on Wednesday and again on Friday said more consensus-building was needed before the legislation would be ready for a vote.
Senate Majority Leader Harry Reid (D., Nev.) said Friday that he was postponing a test vote set for Tuesday "in light of recent events."
House Judiciary Committee Chairman Lamar Smith (R., Texas) followed suit, saying consideration of a similar House bill would be postponed "until there is wider agreement on a solution."
The two bills would allow the Justice Department and copyright holders to seek court orders against foreign Web sites accused of copyright infringement.
The legislation would bar online advertising networks and payment facilitators such as credit card companies from doing business with an alleged violator. They also would forbid search engines from linking to such sites.
The chief Senate sponsor, Patrick Leahy (D., Vt.), cited estimates that copyright piracy costs the U.S. economy more than $50 billion a year and that global sales of counterfeit goods via the Internet reached $135 billion in 2010.
He and Mr. Smith insist that their bills target only foreign criminals and that there is nothing in them to require Web sites, Internet service providers, search engines, or others to monitor networks.
That didn't satisfy critics, who said the legislation could force Internet companies to prescreen user comments or videos, burden smaller Web sites with litigation costs, and impede new investments.
Opponents were relieved the bills were put on hold.
Markham Erickson, executive director of NetCoalition, commended Congress for "recognizing the serious collateral damage this bill could inflict on the Internet."
The group represents Internet and technology companies including Google, Yahoo, and Amazon.com.
Mr. Erickson said they would work with Congress "to address the problem of piracy without compromising innovation and free expression."