Clearly responding to pressure from Internet giants and a growing coalition of activists, House Judiciary Committee Chairman Lamar Smith (R-TX) amended his legislation on Internet copyrights yesterday, rolling back some of the more dangerous elements. A HJC markup of the Stop Online Piracy Act, or SOPA, will take place this Thursday.

The original measure amounted to the holy grail of intellectual property enforcement, as it effectively gave private companies the ability to de-fund websites they alleged to be trafficking in unauthorized copyright and trademark goods — without having to get a judge’s approval.

Under the amended plan (.pdf), which was released late Monday, a judge would have to order ad networks to stop doing business with a site “dedicated” to infringing activities. Under the original proposal, a rights holder could make those demands on an ad network or payment processor and effectively kill off the site.

“That is pretty big,” said Sherwin Siy, a staff attorney with digital-rights group Public Knowledge.

The amendment, however, still gives legal immunity to financial institutions and ad networks that choose to boycott “rogue” sites.

Lamar’s amendments also clarify that sites ending in .com, .org and .net are not covered by the bill. Only foreign sites fall under SOPA’s wrath.

Yet the amendment still allows the Justice Department to demand that Internet Service Providers, such as AT&T and Comcast, block their customers from visiting infringing sites.

This is a mixed bag. There are still plenty of opportunities for censorship in the bill, but the exemption of domestic sites could cool the opposition of big Internet players in this country like Google, Twitter, Mozilla, Reddit and Tumblr. Similarly, the mandated alterations of the DNS (domain name system) to scramble copyright infringing sites has been rolled back as well, although other means could be used to block sites with copyrighted material from rendering in a browser.

It’s unclear whether the coalition will accept these changes, but there’s no question that the ferocity of their response to the initial bill led to this shift by Smith. The legislation still has bipartisan support, as both Smith and House Judiciary Committee ranking member John Conyers (D-MI) sung its praises in a hearing last month.

Demand Progress, the main coalition fighting SOPA, has not yet responded to an email request for a reaction.

UPDATE: The activist coalition fighting SOPA has not been mollified by the changes. “This is standard operating procedure in Washington: hedge the worst of the worst by 10% and pretend that it’s a compromise,” wrote David Segal of Demand Progress via email. While he acknowledged that ditching DNS blocking of websites is positive, the bill as amended would still allow the government to target the revenue streams around websites. And the legal ramifications of the bill remain somewhat of a mystery. ” That’s an essential problem in this realm — limited case law, and judges who don’t use the Internet. So it’s incredibly hard to figure out what much of this means until it’s actually before a court.” In Segal’s view, that means it’s too dangerous to take the risk. “The bill still includes website blocking, still creates new liabilities for sites that rely on user-generate content, still suffers from a thousand vagaries — all for the narrow benefit of the major media conglomerates.”