Friday, March 29, 2019

Verizon Wireless Rolls Out Call Filter to Stop Robocalls

The growing problem of robocalls is an issue that came up during the Free State Foundation's Eleventh Annual Telecom Policy Conference on March 26. 

Verizon Wireless announced on March 28 that it is making available to subscribers a free version of its Call Filter service, which offers new protections from robocalls. Available as a downloadable mobile app, Call Filter provides alerts for likely spam, reporting of unsolicited numbers, and customizable automatic blocking of robocalls. An enhanced version of the service is available for monthly purchase. 

Importantly, Verizon Wireless also announced it initial implementation of STIR/SHAKEN technology to verify that numbers displayed on Caller ID actually placed calls, combatting so-called "spoof" Caller ID info. 

FCC Should Close Its Toll-Free Texting Proceeding and Tackle Robocalls

There were nearly 5 billion robocalls in February, according to press reports. A substantial number of robocalls are scams or unwanted calls. Yet during that same month, there likely were zero instances of toll-free phone numbers being enabled to receive text messages without authorization by business subscribers. That's because toll-free texting isn't a genuine consumer protection problem – but robocalls are a serious and growing problem.

Instead of devoting any further agency resources to considering proposals to impose unhelpful new regulation on toll-free texting, the FCC should promptly close its toll-free texting proceeding and direct its attention to actions which will curb unwanted robocalls. To its credit, the Commission is now trying to determine what further actions it can take to address the robocall problem. 

Although texting is ubiquitous for mobile wireless services, many enterprises sign up with texting service providers to receive texts to their landline numbers, including toll-free numbers. So it was rather unexpected when in 2018 the FCC proposed rules to control authorizations for text enabling of toll-free numbers. Free State Foundation President Randolph May and I filed public comments with the FCC regarding its proposal. As we explained, there is no good reason for regulating authorization of texting services for toll-free numbers. Rather, there are several reasons why regulating toll-free texting would be unwise and harmful. 


First, there is no market failure problem regarding texting and online messaging services.

According to a CTIA estimate, in 2017 American consumers sent a combined 1.77 billion text messages (counting 160-character texts as well as photos and video clips). Competing mobile wireless providers offer consumers service plans that bundle unlimited texting with voice and data. Also, instant messaging, social media, and email are widely available alternatives for consumers. Furthermore, the record evidence compiled in the FCC's proceeding shows no clear-cut instances of consumer harm caused by unauthorized text-enabling of toll-free numbers. 

Second, new regulation would undermine the non-regulated, pro-innovation environment in which texting emerged – and which FCC policy supports.

Text messaging services are a technological and marketplace innovation success story. They developed outside the strictures of legacy telephone regulation. Moreover, in December 2018, the FCC issued an order declaring that text-messaging services fit within the statutory definition of non- or lightly-regulated “information services” under Title I of the Communications Act. The Commission's order acknowledged that SMS spam texting rates of around 2.8% are drastically lower than email spam rates of over 50%. And the order stated that "continuing to empower wireless providers to protect consumers from spam and other unwanted messages is imperative." Just as the order found that legacy telephone regulation under Title II would be harmful to innovation necessary to combat unwanted texts, expanding legacy regulation to text-enabling of toll-free numbers would be equally harmful. 

Third, the FCC's 2018 Declaratory Rulingaddressed any potential problems.

In itsDeclaratory Ruling from June 2018, the Commission "clarif[ied] that only a toll-free subscriber may authorize the text-enabling of a toll-free number and that such authorization must occur beforea toll free number is text-enabled." The Commission's ruling sufficiently set forth the rights of toll-free number owners, facilitating recourse at the Commission or in the courts in cases of alleged violations. Additionally, text messaging service providers have confirmation processes in place for toll-free number owners. Those providers do not stand to gain from text-enabling numbers without authorization, and existing market incentives are adequate to protect consumers. If text-messaging providers abuse the confirmation process, they will damage their reputation and lose valuable business to rival providers and messaging platforms – of which there are many.

Fourth, new regulation would create obstacles to addressing any actual instances of unauthorized text-enablement of toll-free numbers.

The Commission's proposal would require "Responding Organizations" (RespOrgs) to verify that toll-free number owners consented to text-enablement. This would mean inserting RespOrgs – which assign toll-free numbers for voice calling – into an entirely new role of administering already assigned toll-free numbers for texting. But owners of toll-free numbers would not benefit by this because RespOrgs don't possess reliable information regarding the identity of toll-free number owners. Rather, RespOrgs would accrue, wrongfully, a benefit from Commission regulation handing them a new line of business. 

In sum, it's time for the FCC to close its toll-free text-enabling proceeding and to focus the freed-up resources on combatting the increasing number of unwanted robocalls to consumers. 

Thursday, March 28, 2019

Prepared Remarks of FTC Chairman Joseph Simons at FSF's Telecom Policy Conference

The Free State Foundation's Eleventh Annual Telecom Policy Conference was on March 26. This year's conference included a keynote address by Federal Trade Commission Chairman Joseph Simons. His remarks focused on "how the FTC's two missions—competition and consumer protection—apply to the internet ecosystem."

Chairman Simons offered an overview of how the FTC can reach broadband Internet service provider behavior such as blocking, throttling, and paid prioritization under its antitrust and consumer protection jurisdiction. He also discussed the FTC's authority to address alleged deceptive and unfair privacy and security practices by ISPs. According to Chairman Simons, "the FTC will remain active in Internet commerce… we will be able to protect consumers from anticompetitive and unfair or deceptive conduct by ISPs and other firms in this fast-paced industry."

The prepared version of Chairman Simons' remarks is available at the FTC's website here.

Wednesday, March 27, 2019

Prepared Remarks of NTIA's David Redl at FSF's Telecom Policy Conference

The Free State Foundation's Eleventh Annual Telecom Policy Conference was held at the National Press Club on March 26. The Conference included a keynote address by Assistant Secretary of Commerce and NTIA Administrator David Redl. His remarks addressed data privacy, spectrum policy, and expanding broadband. They are available at NTIA's website. 

Regarding data privacy, Assistant Secretary Redl discussed NTIA's request for public comments on the matter. Based on the comments received, Assistant Secretary Redle observed "a sense of urgency, and a desire for Americaion leadership on privacy," along with a "broad industry consensus that we can't have a patchwork regulatory landscape with the U.S." 

In his remarks, Assistant Secretary Redl acknowledged comments submitted to NTIA by Free State Foundation scholars, including President Randolph May and I:
In the comments from Free State, we heard various ways to improve the Federal Trade Commission’s jurisdiction over consumer privacy. You called the FTC the "preferred agency to enforce privacy protections across all digital platforms." 
We agree that it is important to take steps to ensure that the FTC has the necessary resources, clear statutory authority, and direction to enforce consumer privacy laws.
Assistant Secretary Redl also thanked Free State Foundation for comments its scholars submitted to NTIA as part of its process for developing and implementing a comprehensive National Spectrum Strategy by late July. 

The prepared version of Assistant Secretary Redl's remarks are available here.

Wednesday, March 20, 2019

The History of Our Future

According to a report in the March 13thedition of Communications Daily, former FCC Chairman Tom Wheeler said something at a recent Brookings Institution event which caught my eye. Mr. Wheeler, now a Visiting Fellow in Governance Studies at Brookings, said: “The rules that have worked for industrial capitalism are no longer sufficient for internet capitalism.”

I take it Mr. Wheeler made the comment, at least in part, in the context of a discussion regarding the release of his new book, "From Gutenberg to Google: The History of Our Future." I like that catchy title. I've ordered the book, and I may well like more than the title when I have a chance to read the book – probably after the FSF Eleventh Annual Telecom Policy Conference on March 26! To be candid, though, while his book is billed as a "history of the future," about which I'm not so sure, based on Mr. Wheeler's history as FCC chairman, I suspect I'll find enough with which to disagree to report back later.

In the meantime, back to the notion that the "rules that have worked for industrial capitalism are no longer sufficient for internet capitalism." I get there is an uneasiness, warranted in my view, with actions and practices of what is often referred to as "Big Tech" or, if you prefer the stock market jargon, the "FAANGs". That would be Facebook, Apple, Amazon, Netflix, and Alphabet's Google. Indeed, at one extreme, Senator Elizabeth Warren has urged the "break up" of Facebook, Google, and Amazon.

At the Brookings event, Communications Daily reports that Mr. Wheeler declared Facebook isn't a neutral carrier of information but instead exercises editorial control over what users see. In other words, he is asserting Facebook is more than a "mere platform" as the company has long maintained. Mr. Wheeler suggests that Facebook should release the open application programing interfaces showing how it gathers and publishes content. To like effect, Senator Lindsey Graham, who happens to be the Chairman of the Senate Judiciary Committee, said just last week that the algorithms used by Facebook and Google should be released and scrutinized for bias.

So, I get the uneasiness that many feel regarding social media's dark side, and I understand the need for Congress and other appropriate public policymakers to address matters such as the privacy and data security practices of Internet providers.

But I get a sense of unease, too, when Mr. Wheeler apparently suggests a new set of doctrines by conjuring up the notion of "internet capitalism." Here's Merriam-Webster's dictionary definition of capitalism:

: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

I prefer to stick with accepted precepts and first principles. In my view, we are more likely to get the law and policy right for Internet providers and platforms if we don't abandon basic precepts and first principles. For me, capitalism based largely on private decision-making in free markets is a first principle. Therefore, whatever new restrictions and remedies, if any, that may be needed to deal with today's Internet maladies should be considered in the context of the capitalist framework that has been central to the American experience since the nation's Founding. There is no reason to resort to today's suddenly fashionable socialist frame or perhaps tomorrow's fashionable "internet capitalism."



Now, it is important to emphasize, although there should be no need to do so, that Webster says capitalism is an economic system characterized "mainly" by competition in a free market. I certainly agree. Thus, it is clear that proper regulation of private entities – say, for example, properly formulated privacy regulation and data protection mandates – is not inconsistent with a traditional understanding of capitalism as favoring "competition in a free market" as the default presumption.

For capitalism to function properly – indeed for America's larger experiment as a democratic Republic to thrive – adherence to the rule of law is essential. This leads me to mention one other matter that may cause unease. At the Brookings event, Mr. Wheeler bemoaned the fact that, in his view, the fast pace of technological change is short-circuiting democratic processes so "authoritarians" can offer "slogans instead of solutions." As examples, he held up "The Wall" and "Brexit." Mr. Wheeler is not alone, of course, in raising concerns about how speech is employed – some say "weaponized" – on the Internet. But I worry because some of his words and actions during his FCC tenure supported placing more power in the hands of the government to regulate the content of speech than was warranted.

I don't want to debate the merits of any such particular policies here. Rather, the point I wish to emphasize is that, in addressing any legitimate concerns, adherence to the rule of law means nothing if it does not mean adherence to the First Amendment's free speech guarantee. Just as capitalism doesn't mean there cannot be any regulation, the First Amendment doesn't mean that there cannot be any curtailment of speech whatever. But accepted First Amendment jurisprudence makes clear that any curtailment can only be allowed if the government demonstrates a compelling justification and employs the least restrictive means possible to achieve the asserted interest.

And, above all this, which sadly is often misunderstood: The First Amendment is intended to impose limits on government's power to curtail speech, not to empower government improperly to limit the speech of private parties – and, yes, that includes Internet providers and platforms. In a rule of law regime that protects liberty, there are lines in the Constitution that must not be crossed in the name of some claimed "higher purpose," whether such purpose be in the minds of this or that Congress, President, or particular government administrative agency official.

Well, those are some thoughts provoked by my reading about the Brookings event and about Tom Wheeler's new book, "From Gutenberg to Google: The History of Our Future." Even though I may disagree with parts of it, I bet the book will be a worthwhile read. Mr. Wheeler is a long-standing amateur historian, and whether looking back in history, or forward into the future, it is important to discuss, in a civil fashion, and across all kinds of aisles, the ideas he addresses.

Oh, and finally, speaking of discussing important ideas – that's exactly what we will be doing at the Free State Foundation's Eleventh Annual Telecom Policy Conference on Tuesday, March 26, at the National Press Club. I hope you will join us. We are nearing capacity, though, so please register now if you wish to attend. You may register here, and a flyer listing the speakers is here.  


Friday, March 15, 2019

AT&T Exits Ohio With Lifeline

The Public Utilities Commission of Ohio has granted AT&T's request that it be allowed to stop providing Lifeline service on a landline basis in Ohio. While AT&T did not have a significant number of customers in Ohio, this is another indication that the major facilities-based carriers don't really want to devote resources to continuing to provide Lifeline service.

This is just one action by one company in one state -- but there have been many others that are similar. In my view, it is a reason for the FCC to back away from its pending proposal to eliminate participation by resellers in the Lifeline program which is intended to be a "safety net" for the poor. As long as participation by resellers (currently at 70%) far outweighs participation by facilities-based carriers like AT&T, it would risk too much disruption of the Lifeline program for the FCC to move ahead with its "reseller elimination" proposal.

The comments I filed with the FCC in its Lifeline proceeding are here.

Tuesday, March 12, 2019

The FCC Should Limit Local Franchise Fees to Remove Investment Obstacles

The rule of law applies just as much to government as it does to citizens and corporations. The FCC is considering a proposal to hold local governments accountable to the legal limits on fees they can charge to cable TV providers. Under the Commission's proposal, in-kind payments frequently demanded by local governments would be subject to the statutory cap on cable provider franchise fees. This would ensure that local governments do not evade Congress's intent by demanding in-kind payments instead of cash. 

The Commission should follow through with its proposal. If adopted, local governments would still have control over whether they wish to receive cash, in-kind payments, or a mix of the two. But consistent strict application of Congress's cap will help avoid diversions of cable provider capital resources that would harm investment in next-generation networks and even lead to higher consumer prices.


Section 621 of the Communications Act recognizes local franchising authorities (LFAs) may impose certain requirements on local cable TV providers. But the law also puts limits on LFAs. Section 622(b) caps fee amounts that LFAs may charge a cable provider at 5% of the provider's gross revenues from providing cable TV services during any one-year period. Historically, some LFAs have required cable providers to deliver free cable services or other amenities as conditions for receiving or renewing video franchises. When added to required cash payments, in-kind costs can exceed 5% of the provider's gross revenues. In this way LFAs thwart the statutory cap by: (1) requiring cash payments up to the 5% threshold; and then (2) requiring in-kind payments that LFAs deem to be outside the cap's purview. The Commission's proposal would prevent such abuse. 

Free State Foundation President Randolph May and I filed reply comments in support of the Commission's proposal. And I also pointed out the proposal's merits in a prior blog post. Not surprisingly, local governments and their lobbyists have fiercely resisted including in-kind payments under Section 622(b)'s cap on franchise fees. But the Commission's proposed rule for in-kind contributions is fully in line with Congress's intent in placing limits on how much LFAs can charge for video franchises. The proposal would ensure that congressional policy is applied as intended. 

Importantly, the Commission's proposal would not interfere with LFA decisionmaking over whether or not to receive in-kind payments. LFAs typically negotiate with cable providers over terms for awarding or renewing video franchises. Under the proposal, LFAs can continue to negotiate over and receive in-kind payments, including delivery of cable TV services to city offices, community centers, and the like. Thus, LFAs would remain free to decide if they wish to receive cash payments, in-kind payments, or some mix of both. Also, the Commission's proposal would exclude certain expenses required by LFAs from the 5% cap, like capital costs for public, educational, and government (PEG) channel access.

Furthermore, by ensuring that statutory limits on franchise payments are followed consistently, the Commission's in-kind proposal will help avoid harm to investment and deployment of next-generation networks. Cable providers are also broadband Internet service providers. Federal policy rightly favors acceleration of future investment and deployment of next-generation high-speed broadband and Wi-Fi networks. But excessive video franchising fees reduce returns on investment and disincentivize future investment that could be better spent deploying broadband access to all Americans. And when LFAs charge cash and in-kind payments for video franchises that are excessive, aside from the depressive effect on investment it's important to remember at least some of those costs will be passed on to consumers.

The Commission should adopt its proposal to hold local governments accountable and ensure that they follow the law. 

Maryland Revenue Projections Drop

"Maryland’s government will receive hundreds of millions less in revenue than officials previously expected, members of a state fiscal panel said Thursday."

So, begins this Baltimore Sun article by Luke Broadwater.

Sooner or later Maryland's lawmakers, along with Governor Larry Hogan, are going to have to make some tough spending decisions. And sooner is better -- because now the economy is fairly robust, which won't always be the case. 

Saturday, March 09, 2019

The T-Mobile/Sprint Merger on Day 122

On April 29. 2018, T-Mobile and Sprint announced that they had entered into an agreement to merge. On July 18, 2018, applications seeking Federal Communications Commission approval of the merger were accepted by the agency, initiating a pleading cycle for those wishing to oppose, support, or just comment on the merger proposal.

So, July 18 is the date the FCC's famous (or infamous, depending on your view) "shot clock" began ticking. Under the Commission's self-imposed shot clock, the agency has 180 days to act on applications seeking approval of mergers. For various and sundry reasons, including a government shut-down, the Commission can pause the clock. If you look at the clock now, you will see it has been stopped at "Day 122" while the Commission seeks public comment on additional information submitted by T-Mobile and Sprint.

My purpose here is not to complain about the "shot clock" generally or the pace of the FCC's review of the T-Mobile-Sprint proposed merger – although I'll reserve the right to do so later if it seems appropriate. Rather my purpose is to offer – briefly – a few thoughts on where matters stand as we approach the one-year mark of the merger announcement, albeit only on Day 122 of the stopped shot clock.



At some point in the merger review process, it is not unusual for competitors of the merger applicants to become more vocal in their opposition to the merger. In fact, it is unusual if they don't. Of course, the competitors' opposition is couched in "public interest" lingo, not overtly protectionist lingo – such as "please, Mr. Commissioner, protect me from having to compete against a stronger post-merger competitor."

Let me be frank: In my view, T-Mobile and Sprint have succumbed to such special pleading in the past based on just such a "competitor protectionist" reflex. And, to be sure, they have had plenty of company from other market participants seeking to use the regulatory process to protect their positions.

But any party's past behavior in this regard is irrelevant. The Commission (and the Department of Justice, of course) need to keep in mind that a primary objective of the public interest analysis is to determine whether the merger will have an adverse impact on competition, not on competitors. These are two entirely different things, but they are often conflated, deliberately or otherwise.

As my Free State Foundation colleague Seth Cooper and I have explained in detailed substantive comments and reply comments filed with the FCC, in this instance the proposed merger is likely to enhance competition in the wireless broadband market and also in the overall broadband market. Indeed, as we explain at some length in those comments, given the growing cross-platform competition between wireline and wireless providers employing differing technologies, and especially with the advent of 5G networks, it is this broader broadband market that, more properly, is the relevant market for purposes of analyzing the merger's competitive impact.

Another matter of which to be wary beginning right about now in the merger process are increasingly vocal cries for the imposition of various and sundry merger conditions from competitors and other parties. They have a right to plea for this or that condition, of course. And the "public interest" standard under which the merger is judged at the Commission, as opposed to the competition standard at DOJ, is sufficiently indeterminate that all manner of objections and proposed conditions are claimed to fit under the public interest umbrella. These include, by way of one example, the notion that the Commission should condition merger approval on elaborate commitments regarding job retention, maintenance of employee counts for certain types of positions and in certain locations, and so forth. However commendable the commitments already offered by T-Mobile and Sprint with regard to these matters, concerns like these relating to job protection should not be at the core of the Commission's public interest analysis.

Please note: This is not to say matters like these are unimportant or totally outside of the public interest ambit, but they shouldn't be at the core. At the core of the merger review analysis should be consumer welfare– or put even more simply without the gloss of the economists' lingo: Overall, and over time, are consumers likely to benefit from the efficiencies and synergies associated with the merger?

At this point in the review process, I don't have any reason to alter the view expressed in the comments filed with the FCC on August 27, 2018:

[T]here is strong evidence that the proposed T-Mobile/Sprint merger, if approved, would greatly benefit consumersand enterprises by enabling faster mobile broadband speeds, higher data capacity, and reduced per-megabit prices. A combined “New T-Mobile” would have the resources to rapidly deploy a nationwide 5G network and to compete more effectively against AT&T and Verizon, presently the two largest wireless carriers. On its face, the proposed merger appears to satisfy the public interest standard.

Note the emphasis on consumers in our original FCC submission.

Now, one final but yet important point: In the D.C. Circuit's recent opinionin United States v. AT&T, Inc. affirming the District Court decision refusing to block the AT&T/Time Warner merger, the court repeatedly pointed to the trial court's reliance on "real-world evidence" over proffered "quantitative" economic models divorced from real-world data. Each merger is different, of course. Nevertheless, fairly read, the D.C. Circuit's opinion should be a caution for antitrust and regulatory authorities not to be overly seduced by theoretical economic models prepared by the "quants" that are divorced from the dynamic realities of today's communications marketplace.

Certainly, at a time when cable operators and Internet web giants like Google, along with regional carriers, are competing for customers in the wireless marketplace, it would be wrong for regulators to put much weight on static quantitative models purporting to suggest that there must be at least four nationwide facilities-based wireless operators in order to protect consumers.

This would be the equivalent of committing analysis by shibboleth-paralysis.  

With all the foregoing in mind, on Day 122, I continue to hold that the proposed merger of T-Mobile and Sprint likely will benefit consumers.

Wednesday, March 06, 2019

IP Enforcement Coordinator's Report Spotlights Copyright Protection Progress

In late February, the Intellectual Property Enforcement Coordinator (IPEC) released its Annual Intellectual Property Report to Congress. The Report provides "an overview of the Trump Administration's intellectual property enforcement strategy and policy efforts" across multiple agencies. IPEC's coordination and development of U.S. IP policy is intended "to promote innovation and creativity, and to ensure effective intellectual property protection and enforcement, domestically and abroad." 

Although the Trump Administration's enforcement policy "includes all areas of intellectual property and innovation policy," its policy activities regarding copyright protections merit attention. In 2018 progress was made in better securing copyrights. But there is plenty more that the Trump Administration and the 116th Congress can do to modernize and strengthen protections for Americans' creative works. 

One achievement touted in the Report is the passage of the Music Modernization Act of 2018. In an op-ed for The Hill and in several blog posts, Free State Foundation President Randolph May and I urged Congress to adopt reforms contained in that legislation. The Act (1) secured federal copyright protections for public performances via digital audio transmission of pre-1972 sound recordings; (2) established a streamlined process for producers, mixers, and sound engineers to directly receive royalty payments; and (3) facilitated more timely and accurate payment of songwriter "mechanical license" royalties and also provided blanket licenses for digital streaming services. As I explained in a February blog post, the widely endorsed MLC Coalition will be submitting to the U.S. Copyright Office a proposal for creating a collective entity to administer mechanical license royalties pursuant to the Act. 

An appendix in the IPEC Report highlighted the Copyright Office's expected release of its public study report on the "moral rights" of authors. Moral rights provisions in foreign nations typically restrict or prohibit sales or transfers of authors' rights to be acknowledged as creators of their works as well as their rights to control the integrity or future use of their works. In a Perspectives from FSF Scholars, Randolph May and I made the case that "current U.S. copyright law as well as contract law protect authors’ and creative artists’ rights to control whether they receive credit for their copyrightable works and whether their works are adapted into new media or transformed." We concluded: "Importing additional foreign-based moral rights restrictions into U.S. copyright law would create legal uncertainties, destabilize existing voluntary contract arrangements, reduce market freedom, and threaten the market value of copyrighted works."

The IPEC Report also referenced the Copyright Office's ongoing public study of Section 512 of the Digital Millennium Copyright Act of 1998 (DMCA). Section 512 contains the so-called "notice-and-takedown" provision under which copyright holders are entitled to give notice to an online service provider when infringing content is posted on its network or website. A provider receives immunity if it “responds expeditiously to remove, or disable access to, the material that is claimed to be infringing.” 

Unfortunately, owners of copyrighted sound recordings, movies, and other creative works suffer steep financial losses from mass online infringement. They also experience difficulties navigating the DMCA's outdated legal processes. The DMCA was adopted before user-upload sites such as YouTube became prevalent. In a Perspectives paper, Randolph May and I called attention to the urgent need to update the law, and we highlighted ways that Congress can reduce notice-and-takedown compliance burdens for copyright holders and improve protections from online infringement. That same paper also called on Congress to adopt a voluntary small claims court for resolving disputes over alleged online infringement involving copyright owners of modest means. 

Additionally, the IPEC Report identifies ongoing criminal copyright investigations and prosecutions by federal law enforcement. A Report appendix noted that the U.S. Justice Department "continues to pursue significant, large-scale piracy and counterfeiting operations." It cited the March 2018 sentencing for criminal copyright infringement of the owner of Sharebeast.com, which "operat[ed] a massive file-sharing infrastructure that distributed approximately 1 billion copies of copyrighted musical works through Internet downloads." Indeed, the Report cited the Recording Industry Association of America's (RIAA) description of Sharebeast.com as "the largest online file-sharing website specializing in the reproduction and distribution of infringing copies of copyrighted music operating out of the United States." The RIAA estimated $6.3 billion in total loss to its members. Furthermore, according to the Report, the FBI had pending "23 investigations of copyright infringement related to software,""41 investigations of other copyright infringement," and "8 investigations of copyright infringement related to signal theft" of video programming at the end of fiscal year 2018. 

Randolph May and I published a Perspectives paper on how Congress ought to modernize criminal copyright law to combat online piracy. For starters, Congress should make online piracy via Internet streaming a felony. Prosecutions for criminal copyright infringement are not numerous, and they are limited to willful infringement of protected works. However, civil copyright enforcement is oftentimes inadequate for curbing large-scale online piracy operations like Sharebeast.com. In another Perspectives from FSF Scholars, we emphasized the need to modernize international agreements by requiring foreign nations to step up criminal copyright enforcement against large-scale online piracy. 

The IPEC Report is valuable in spotlighting key achievements and ongoing initiatives by the Trump Administration to strengthen protections for IP, including copyrighted works. In 2019, the Trump Administration and the 116th Congress ought to commit to building on that progress to better secure Americans IP rights and to advance our economy in the Digital Age. 

Friday, March 01, 2019

IP Commission Recommends Steps to Protect America From International IP Theft

On February 21, 2019, the Commission on the Theft of American Intellectual Property issued a report highlighting "policy developments in the last 18 months related to strengthening the United States' ability to protect IP." The IP Commission's 2019 Review focused on U.S.-China relations, offering recommendations for more effectively preventing forced technology transfers, economic espionage, and intellectual property (IP) theft. 

According to the IP Commission's 2017 report, "the annual cost of counterfeit goods, pirated software, and theft of trade secrets to the U.S. economyis between $225 billion and $600 billion," and China is "the world's principal IP infringer." In fiscal year 2017, 87% of counterfeit goods seized coming into the U.S. originated from China and Hong Kong.

The IP Commission's 2019 Review applauded American policymakers' responses to Chinese IP wrongful practices:
The Trump Administration has elevated the elimination of China’s theft of American IP, whether through cyber-theft, forced technology transfers, stolen trade secrets, counterfeiting of products, or other means, to one of the leading foreign policy priorities and a top goal of the U.S.-China economic negotiations. 

The IP Commission acknowledged the Section 301 investigative report findings of the United States Trade Representative (USTR) regarding Chinese IP policies and practices. The USTR concluded that China "unfairly target[s] critical U.S. technology with the goal of achieving dominance in strategic sectors" and that its practices are harmful to American innovation and competitiveness. Additionally, the IP Commission's 2019 Review acknowledged the USTR's placement of China on the "Priority Watch List" over concerns that include "trade secret theft, online piracy and counterfeiting, a high volume of manufacturing and exporting counterfeit goods, technology transfer requirements, mandatory application of adverse terms to foreign IP licensors, localization requirements, and weak enforcement." 

Finally, the IP Commission made several recommendations for strengthening American IP protections from foreign theft, including: (1) construction of an"independent international database for scoring of entities from foreign countries that pose IP risk;" (2) a streamlined process for reporting and responding to IP theft; (3) requiring the Securities and Exchange Commission (SEC) to determine whether companies' use of stolen IP ought to be publicly reported; (4) meaningful sanctions by the Federal Trade Commission (FTC) against foreign companies using stolen IP; and (5) use of "multilateral institutions to harmonize national and international legal and regulatory frameworks."

Previously, FSF President Randolph May and I have addressed the pressing need to strengthen protections for Americans' IP internationally – particularly for copyrighted movies and music. In our Perspectives from FSF Scholars paper, "Modernizing International Copyright Agreements to Combat Copyright Infringement," we explain that several foreign countries insufficiently protect Americans' copyrighted works from digital piracy and online infringement taking place through cyberlocker websites and stream-ripping websites. As we urged there: "The Trump Administration should ensure that stronger protections for Americans' creative works are included in new treaties and trade agreements that are attuned to the Digital Age."

In particular, the proposed United States-Mexico-Canada Agreement (USMCA) would strengthen copyright protections and enforcement by securing Americans' full enjoyment of exclusive rights in sound recordings, ensuring longer protection terms, and providing stronger civil remedies and criminal penalties for copyright infringement. However, international agreements such as USMCA should not include outdated online infringement provisions that are similar to Section 512 of the Digital Millennium Copyright Act of 1998. Section 512 is ineffective in protecting copyrighted movies and music from massive online infringement via user-upload websites. We identify problems with Section 512 and call for reforms to strengthen online copyright protections in our Perspectives paper, "Modernizing Civil Copyright Enforcement for the Digital Age Economy: The Need for Notice-and-Takedown Reforms and Small Claims Relief."

In sum, in the interest of securing greater protection for Americans' intellectual property, it's worth paying close attention to the IP Commission's most recent report