Wednesday, January 24, 2018

U.S. Trade Representative Report Spotlights Rogue Piracy Websites and Devices

Online piracy deprives copyright owners of their exclusive rights to the proceeds of their creative works and causes billion-dollar damages to the U.S. economy each year. Identifying large-scale intellectual property piracy operations is an important part of combatting such harmful and unlawful activities. The U.S. Trade Representative's annual report on Notorious Markets focuses on online copyright piracy involving stream-ripping websites and illicit streaming devices. The report’s publication exerts pressure on foreign governments and private entities to curtail IP piracy in their vicinities. 

Released on January 10, the U.S. Trade Representative’s report for the year 2017 includes a “Notorious Markets List” intended to highlight “prominent and illustrative examples of online and physical marketplaces that reportedly engage in, facilitate, turn a blind eye to, or benefit from substantial [copyright] piracy and [trademark] counterfeiting.” According to the report’s press release: “Imports in counterfeit and pirated physical products is estimated at nearly half a trillion dollars.”Publication of the of Notorious Markets List is intended “to motivate appropriate action by owners, operators, and service providers in the private sector of these and similar markets, as well as governments, to reduce piracy and counterfeiting.” 

The Notorious Markets List identifies the stream-ripping websites that, without authorization, convert copyrighted music and video content from licensed streaming sites into files that are downloadable by Internet end users. The Notorious Markets List draws particular attention to online piracy sites funded by ad revenue. The report cites a whiteBULLET report of the top 5,000 IP-infringing website URLs in the U.S., European Union, and Australia, which found that “about 25-30% of advertising on websites posing an IP risk are from major brands.” The List specifically names piracy sites – or alleged piracy sites – operated by foreign entities and/or hosted in foreign nations, such as France, Russia, and Vietnam. 

Further, Internet end users seeking unauthorized access to copyrighted content can be harmed by online piracy. The report observed that online piracy sites “actively and surreptitiously install malware on users’ computers, commit advertisement fraud, and enable phishing scams that steal personal information, all to increase their unlawful profits.” And it cited a July 2016 Digital Citizens Alliance report that one-third of copyrighted content theft sites “expose consumers to malware and other risks.” 

The 2017 Notorious Markets Report also focused on the issue of illicit streaming devices (ISDs). Using piracy apps, ISDs stream or download pirated content from the Internet. According to the report, ISDs can be “fully loaded” at the time of sale with piracy-enabling capabilities or ISDs can be “combined with add-ons after purchase” to access pirated content. 

Under Section 106 of the Copyright Act, copyright owners of sound recordings, motion pictures, and other audiovisual works have exclusive rights over the distribution of their works. Copyright owners negotiate detailed licensing agreement for rights to stream or download copyrighted content to retail consumers. But ISD-enabled piracy violates the exclusive rights of copyright owners and also impairs their contract rights contained in licensing agreement terms of service. 

The 2017 Notorious Markets Report describes the economic consequences: “The growth of ISDs is a troubling threat to the pay TV and other content industries and undermines incentives for companies to improve services or offer a greater selection of content in more markets.” Citing findings published by Sandvine in November of 2017, the report states: “ISD piracy ecosystem, including unlawful device sellers and unlicensed video providers and video hosts, stands to bring in revenue of an estimated $840 million a year in North America alone, at a cost to the entertainment industry of roughly $4-5 billion a year.” Correctly, the report deems it “critical” for governments and private industries to fight threats from growing ISD piracy. 

On the good news side, the report explained why certain online piracy sites were removed from the prior year’s Notorious Markets List, thanks largely to civil and criminal enforcement efforts by cooperative foreign governments and industries. The U.S. Trade Representative rightly commended those overseas anti-piracy efforts. 

International engagement is essential to protecting the exclusive rights of U.S. copyright holders abroad. The U.S. Trade Representative performs a vital function in this regard. Hopefully, the 2017 Notorious Markets Report will prompt stronger enforcement efforts against copyright violations by stream-ripping sites, illicit streaming devices, and other piracy-enabling platforms in 2018.