USTR Report Identifies Online Copyright Piracy Operations in Foreign Nations

On January 8, the Office of the U.S. Trade Representative (USTR) released its "2024 Review of Notorious Markets for Counterfeiting and Piracy" – also known as its Notorious Markets List (NML). The NLM “highlights prominent and illustrative examples of online and physical markets that reportedly engage in, facilitate, turn a blind eye to, or benefit from substantial piracy or counterfeiting," with a goal "to motivate appropriate action by the private sector and governments to reduce piracy and counterfeiting." 

The NML noted law enforcement actions taken in 2024 by foreign nations, in some instances in partnership with the US Department of Justice, against pirate streaming services, including pirate-enabled Internet Protocol television (IPTV) services that rely on ad-supported "cyberlocker" sites to facilitate the storage and distribution of pirated content. Also, the NML noted that many copyright owners who made filings in the US Trade Representative’s proceeding raised continued concerns about "bulletproof" Internet service providers that facilitate piracy through avowed leniency in permitting users to upload and distribute infringing content, hiding their locations, and refusing to respond to takedown requests from copyright owners. Additionally, the NML listed some websites across the globe that are known to traffic in infringing content as well as physical market locations in foreign nations where physical copies of infringing are trafficked. 

 

The U.S. Constitution's Article I, Section 8 Copyright Clause recognizes that copyrighted property deserves to be secured from online and physical piracy. My February 2024 Perspectives from FSF Scholars, "Congress and the Administration Should Move Against Online Copyright Piracy," points to stepped-up criminal prosecutions against mass online piracy operations as one way of securing copyrighted property. As pointed out in the 2024 NML, copyright piracy is a serious problem and it's one the incoming Trump Administration should make solid efforts to combat. Indeed, as explained in a June 2021 Perspectives from FSF Scholars, "Fighting Online Piracy Will Boost American Economy and Jobs."

Copyright Advocates Stepping Up Efforts Against Online Piracy

On November 26, The Motion Picture Association's (MPA) Executive Vice President and Chief Content Protection Officer Larissa Knapp, published a blog post announcing the MPA Content Protection team's strategic goals to deter, detect, and dismantle online piracy operations in 2025. Ms. Knapp's blog post can be found on the website of the Alliance for Creativity and Entertaining (ACE), an online antipiracy coalition of over 50 media and entertainment companies. ACE addresses piracy through public education, research into piracy trends, criminal referrals, civil litigation, and cease-and-desist operations. 

Hopefully, the efforts of MPA, ACE, and individual U.S. copyright owners to curb unlawful online copyright infringements in 2025 will be successful.

Online piracy of creative works, including movies and TV shows, undermines the rights of copyrighted property owners, inflicting large-scale damages on owners and reducing jobs and economic opportunities for those industries that help support creative enterprises. ACE's July 2023 report "2022 Movie & TV Piracy Trends Worldwide" cites analyst estimates for the U.S. that there were 14.7 billion visits to film and TV piracy sites that year, as well as 1.9 billion pirated movies, primetime TV, and video-on-demand (VOD) shows using peer-to-peer protocols, not including streaming and downloading sites. Additionally, ACE's report cited an estimate that revenue losses to the U.S. economy due to global online piracy totaled $29.2 billion in 2022. 

 

My February 2024 Perspectives from FSF Scholars, "Congress and the Administration Should Move Against Online Copyright Piracy," identified three ways to improve protections for Americans' copyrighted works from online piracy: (1) confirmation of an Intellectual Property Enforcement Coordinator (IPEC) to engage foreign nations on copyright piracy: (2) stepped-up prosecutorial efforts against streaming piracy operations; and (3) legislation by Congress to establish a "notice-and-stay-down" requirement for major online platforms as a condition for receiving immunity for infringements on their websites. My World IP Day 2024 blog post added: (4) legislation by Congress to establish a legal process for judicial site-blocking of third-party websites dedicated entirely or overwhelmingly to unlawful online copyright piracy. 

 

The Free State Foundation is dedicated to the protection of private property rights, including intellectual property. In the year to come, FSF scholars will have more to say about legal and policy measures to combat online copyright piracy. 

Small Claims Board Providing Copyright Owners Access to Justice

On October 22, the U.S. Copyright Office released a "Key Statistics" report on the Copyright Claims Board. The Board was established under the Copyright Alternative in Small-Claims Enforcement Act (CASE Act), passed by Congress in December 2020 and signed into law by President Donald Trump. The Board serves as a voluntary, virtual forum for resolving disputes over alleged copyright infringement claims where the damage amount in controversy is $30,000 or less. Both sides must agree to resolve their dispute at the Board, and its decisions are enforceable in federal court.  

According to the information provided by the Copyright Office, as of September 2024, nearly 1,000 claims have been filed with the Copyright Claims Board. Also, 63% of such claims involved self-represented individuals, and 46% of the cases were for smaller damages of less than $5,000. 

 

The Board appears to be performing a useful function by providing copyright owners with a cost-effective venue to protect and enforce their intellectual property (IP) rights in creative works, such as photos, movies, and music recordings. For a copyright owner to hire an attorney and bring an infringement case in federal court, he or she typically must be willing to spend tens of thousands of dollars.  

 

Free State Foundation President Randolph May and I recommended the creation of such a small claims venue in our book Modernizing Copyright Law: Constitutional Foundations for Reform (Carolina Academic Press, 2020).

Internet Archive's Fair Use Defense Fails Again at Appeals Court

On September 4, the U.S. Court of Appeals for the Second Circuit issued its decision in Hachette Book Group, Inc. v. Internet Archive. The Second Circuit panel affirmed a District Court's March 2023 entry of summary judgment against Internet Archive for infringing the copyrights of four book publishers in 127 books.  

Internet Archive created unauthorized digital copies of those books as part of its "Free Digital Library" and mostly. Beginning in 2018, the Internet Archive made digital copies of those copyrighted books available online to the public. Starting in 2020, the Internet Archive provided the public access to those copyrighted books on a one-to-one owned-to-loaned ratio under a practice that the Internet Archive called "Controlled Digital Lending" or "CDL." The District Court found that all of the elements for infringement were established by the publishers, and the court rejected Internet Archive's fair use defense.

The Second Circuit's decision mostly tracked with the District Court's decision, concluding that "IA's lending of its 'own' digital books that 'are commercially available for sale or license in any electronic text format'" is not fair use. 

According to the appeals court, "because IA's Free Digital Library primarily supplants the original Works without adding meaningfully new or different features that avoid unduly impinging on Publishers' rights to prepare derivative works, its use of the Works is not transformative." Although the Second Circuit differed from the District Court in concluding that the alleged fair use was not commercial in nature, it nonetheless held that "because the Works in Suit are 'of the type that the copyright laws value and seek to protect,' the second fair use factor favors Publishers." The court determined that copying and posting the entirety of the work was not secondary to some other use that would offer significant functional benefits not associated with the original works and that "not only is IA's Free Digital Library likely to serve as a substitute for the originals, the undisputed evidence suggests it is intended to achieve that exact result." 

 

The Second Circuit further determined that "IA has not met its 'burden of proving that the secondary use does not compete in the relevant market[s]' and that “[i]ts empirical evidence does not disprove market harm, and Publishers convincingly claim both present and future market harm." The court concluded that "[a]ny short-term public benefits of IA's Free Digital Library are outweighed not only by harm to Publishers and authors but also by the long-term detriments society may suffer if IA's infringing use were allowed to continue." And it found that all of the fair use factors favored the copyright owners. 

 

Aside from its loss in Hachette, Internet Archive faces additional troubles due to alleged infringements of copyrighted music recordings." My September 2023 Perspectives From FSF Scholars, "Internet Archive to Face the Music for Mass Copyright Infringement," analyzes copyright infringement claims raised in UMG Recordings v. Internet Archive. At issue in that case is Internet Archive's "Great 78 Project," which allegedly copied, stored, distributed, and publicly performed thousands of copyrighted pre-1972 music recordings without authorization. 

 

The decision in Hachette may offer persuasive insights for the District Court in UMG Recordings, insofar as Internet Archive again relies on fair use as an affirmative defense to infringement claims. For starters, the "Great 78 Project" involves no apparent transformative use or significant functional new benefit not inherent in the original works themselves. Scratches or analog background noises from digital recordings of vinyl copies of pre-72 recordings being played on turntables are hardly transformative. Expect FSF scholars to have more to say in the future about the ongoing case of UMG Recordings v. Internet Archive.

World IP Day 2024: Time to Step Things Up Against Online Copyright Piracy

April 26 is World Intellectual Property Day. Copyrights are more important to the U.S. economy today than at any previous time in history. The American Founders had the wisdom and foresight to put copyright protections in the 1787 U.S. Constitution. But securing Americans' rights in creative works such as movies, TV shows, and music from mass online piracy is an ongoing responsibility of Congress. In 2024, Congress should consider establishing a legal process for copyright owners to obtain court orders requiring broadband providers to block access to third-party websites whose entire or overwhelming purpose is to unlawfully traffick copyrighted content. 

According to a January 30 report by the U.S. Trade Representative, commercial-scale copyright piracy causes "significant financial losses for U.S. right[s] holders and legitimate businesses" and it "undermine[s] critical U.S. comparative advantages in innovation and creativity to the detriment of American workers." The report cited a June 2019 study by the Global Intellectual Property Center that found online piracy costs the U.S. economy $29.2 billion in lost revenue each year. The study also found that illegal streaming and file-sharing operations cost about 250,000 American jobs yearly. 

As the Trade Representative's report explained, there is a worldwide "complex ecosystem" for online piracy.Unauthorized Internet Protocol television (IPTV) operators stream vast libraries of copyrighted content, including live sports and premium channels, at below-market prices. "Cyberlocker" sites "act as the hosting and content storage sites for the world's most popular piracy streaming and linking websites." Many cyberlocker sites "offer a tiered revenue sharing system to reward the uploaders of their most popular content," including copyrighted content that has not yet been commercially released to the public. Online infringements also are facilitated by foreign "bulletproof" Internet service providers (ISPs) that "often explicitly advertise leniency in allowing their customers to upload and distribute infringing content" and refuse to comply with U.S. law.

 

In a February 2024 Perspectives from FSF Scholars, "Congress and the Administration Should Move Against Online Copyright Piracy," I identified three ways to better protect Americans' copyrighted works from mass online piracy: (1) confirmation of an Intellectual Property Enforcement Coordinator (IPEC) to engage foreign nations on copyright piracy: (2) stepped-up prosecutorial efforts against commercial streaming piracy operations; and (3) establishment of a "notice-and-stay-down" requirement for major online platforms to prevent serial re-posts of infringing content on their websites as a condition for obtaining immunity for infringements. 

 

But here is a fourth way to combat online piracy and improve protections for copyrighted content: establishment of a legal process for judicial site-blocking of third-party websites that are dedicated entirely or overwhelmingly to unlawful online copyright piracy.

 

In an April 9 speech, Motion Picture Association (MPA) Chairman and CEO Charles Rivkin called digital piracy "a central threat to the security of workers, audience, and the economy at large." His estimate of the damages from such piracy is stunning: "In the U.S. alone, it steals hundreds of thousands of jobs from workers and tens of billions of dollars from our economy, including more than one billion in theatrical ticket sales."

 

Mr. Rivkin pledged that his organization is going to work with Congress on judicial site-blocking legislation that "focuses only on sites featuring stolen materials" and that is "within the bounds of due process, requiring detailed evidence establishing a target's illegal activities and allowing alleged perpetrators to appear in a court of law." On behalf of MPA, he also pledged an "unflinching commitment to the First Amendment."

 

Indeed, due process and free speech are essential starting points for any judicial site-blocking legislation worth considering. Such a bill must be tightly focused on websites that are entirely or overwhelmingly dedicated to trafficking commercial copyrighted content, not viewpoints expressed on such sites. It must authorize only a private civil cause of action and not be a potential tool for government censorship of lawful speech. Additionally, a worthy judicial site-blocking bill would avoid imposing any undue burdens or costs on compliant broadband ISPs. Also, there must be a legislative process that provides transparency on the content of bills and amendments, committee hearings, and opportunities for public input.

 

On World IP Day, Congress should remember the billions in economic damages suffered by American copyright owners each year because of the global online piracy ecosystem. In the months ahead, Congress should develop and consider a constitutionally sound bill authorizing judicial orders to block access to third-party sites that exist for the purpose of engaging in unlawful mass online infringements. 

Court Decision Brings Clarity to the Law of Contributory Copyright Infringement

On October 16 of this year, the U.S. Court of Appeals for the 10th Circuit issued a significant decision regarding contributory liability for copyright infringement. In Greer v. Moon, the court concluded that the plaintiff-appellant sufficiently stated a claim for contributory copyright infringement against the defendant-respondents – a  website and its operator – by alleging that digital copies of a copyrighted book and a copyrighted music recording were posted on the website without authorization, the site refused to comply with a takedown notice, and that the site's conduct contributed to the infringement by encouraging the site's users to commit direct infringement.

Contributory liability is a form of secondary liability for copyright infringement, and it requires that a copyright owners show: (1) existence of a direct infringement; (2) a party's knowledge of the direct infringement; and (3) a party's contribution to the direct infringement by causing or materially contributing to it. 

The lower court had dismissed the plaintiff-appellant's infringement claims against the website and its operator on the grounds that merely permitting infringing material to remain on the site without having induced or encouraged "the initial infringement" is not enough to plead infringement based on contributory liability. 

 

However, the 10th Circuit concluded that the defendant-respondents' alleged conduct went beyond passive behavior in merely permitting infringing content to remain on the site. According to the court, a reasonable inference from the facts alleged is that the site's reposting of the plaintiff-appellant's copyright takedown notice – apparently to belittle the copyright owner and the notice as well as for acknowledge that the sites users would continue to engage in infringing activity – amounted to encouragement of the site's users to engage in direct infringement of the plaintiff-appellant's protected works. 

 

Importantly, the 10th Circuit determined that the lower court's insertion of "initial infringement" qualifier to making a claim contributory liability for infringement was improper. It wrote: "We cannot understand initial to be a literal requirement supported by applicable law, otherwise contributory infringement liability would rarely, if ever, lie for ongoing repeated infringements."

 

In Greer v. Moon, the 10th Circuit rightly rejected a would-be barrier to obtaining relief for contributory copyright infringement because it is unsupported by law. Unfortunately, courts in other cases have sometimes narrowed the scope of traditional secondary liability principles as applied in the context of Section 512 of the Digital Millennium Copyright Act (DMCA). Free State Foundation President Randolph May and I address this in our June 2020 Perspectives from FSF Scholars, "Copyright Office Report Should Spur Modernizing the DMCA." 

Supreme Court Declines to Hear Case on Direct Copyright Infringement

On October 2, the Supreme Court denied certiorari in ABKCO Music, Inc. v. Sagan (2022). I wrote about this case in my September 20 Perspectives from FSF Scholars, "Supreme Court Should Clarify the Law on Direct Infringement of Copyrighted Works." By declining to grant review of the case, the court unfortunately passed up the opportunity to set the law straight that a defendant that orders and participates in an infringement can be liable for direct infringement even if the defendant did not personally perform the literal act of copying the copyrighted work. 

As explained in my Perspectives paper, the Second Circuit went off course in Sagan by improperly applying the "volitional conduct" requirement for direct infringement liability. The lower court wrote that "direct liability attaches only to 'the person who actually presses the button.'" But that is at odds with a copyright owner's "exclusive rights to do and to authorize" under Section 106 of the Copyright Act. As the Supreme Court observed, in Sony Corp. of America v. Universal City Studios, Inc. (1984), "an infringer is not merely one who uses a work without authorization by the copyright owner, but also one who authorizes the use of a copyrighted work without actual authority from the copyright owner."

 

By refusing to hear the case, the court lets stand the Sixth Circuit's decision that unduly narrows the traditional understanding direct infringement and that conflicts with decisions in at least other circuits. For instance, in Society of the Holy Transfiguration Monastery, Inc. v. Gregory (2012), the First Circuit emphasized that an infringer includes "one who authorizes the use of the copyright work without actual authority from the copyright owner" – quoting Sony. And in Lewis Galoob Toys, Inc. v. Nintendo of America, Inc. (1992), the Ninth Circuit recognized that "infringement by authorization is a form of direct infringement."

 

For now, it is to be hoped that other lower courts will decline to follow the Sixth Circuit's misapplication of the volitional conduct requirement and unduly narrow definition of direct infringement that undermines the ability of copyright owners to enforce their exclusive rights. 

USTR Report: Foreign Nations Should Step Up Efforts to Curb Online Copyright Piracy

On April 26, the Office of the U.S. Trade Representative (USTR) released its 2023 Special 301 Report on intellectual property (IP) enforcement and protection by our nation's trading partners. The Section 301 Report provides an overview of various initiatives by the Administration to promote stronger protections for Americans' IP overseas, tracks recent trends in other nations regarding IP, and offers succinct status reports on IP protections and enforcement – or lack thereof – in individual countries. 

One area of attention in the Section 301 Report is online piracy. According to the report, in 2022 and early 2023, "countries such as Argentina, Bulgaria, Canada, Chile, China, Columbia, the Dominican Republic, India, Mexico, the Netherlands, Pakistan, Romania, Russia, Switzerland, Thailand, Ukraine, and Vietnam had high levels of online piracy and lacked effective enforcement." In particular, the report identified high incidence of music piracy by the use of "stream-ripping" software to create unlawful copies of songs in Canada, India, Korea (the report never specified North or South), Mexico, Russia, Switzerland, Ukraine, and the United Arab Emirates. 

Additionally, the Section 301 report called attention to the use of illicit streaming devices (ISDs) to facilitate unauthorized streaming of copyrighted video content offered by illicit Internet Protocol television (IPTV) services. As the report observed: "Today, there are many illegal IPTV services worldwide, many of which are subscription-based, for-profit services with vast and complex technical infrastructures." Significant levels of piracy via ISDs and illicit IPTV apps reportedly takes place in Argentina, Brazil, Canada, Chile, China, Guatemala, Hong Kong, India, Indonesia, Iraq, Jordan, Mexico, Morocco, Singapore, Switzerland, Taiwan, Thailand, Tunisia, and Vietnam. And report rightly observes that online piratical activities inflict substantial economic harm on American creators of copyrighted works and undermine the competitive viability of legitimate online platforms for distributing creative content. 

 

The Section 301 report ought to be a reminder of the need for the U.S. to keep up pressure on foreign nations that do not take IP protection and enforcement seriously and turn a blind eye to online copyright piracy and other forms of IP theft and counterfeiting. In our book, Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform(Carolina Academic Press, 2020), Free State Foundation President Randolph May and I provide a brief history of early U.S. efforts to secure copyright protections for Americans' creative works in foreign countries. Our book also addresses the need for domestic criminal copyright enforcement against large-scale commercial piracy operations as well as the need for strong copyright protections in free trade agreements.  

Arrests Made in Criminal Copyright Infringement Case Involving E-Book Piracy Ring

On November 16, the U.S. Attorney's Office for the Eastern District of New York announced the indictment and arrest of two Russian nationals for criminal copyright infringement and other charges in relation to their alleged operation of a massive online e-book piracy website operation.

The Office's press release states:

As alleged in the indictment and court filings, Z-Library bills itself as "the world's largest library" and claims to offer more than 11 million e-books for download.  Z-Library, which has been active since approximately 2009, offers e-book files in a variety of file formats, stripped of their copyright protections, and encourages users to upload and download titles. Many of the e-books offered by Z-Library are protected intellectual property for which authors hold copyrights and publishers hold exclusive distribution rights, and which Z-Library has no right or license to distribute, and which are available elsewhere only with anti-circumvention measures applied. As such, a central purpose of Z-Library is to allow users to download copyrighted books for free in violation of U.S. law. In addition to its homepage, Z-Library operates as a complex network of approximately 249 interrelated web domains. As part of this action, those domains were taken offline and seized by the U.S. government.

Like any other defendants, the defendants named in U.S. v. Napolsky and Ermakova are entitled to a presumption of innocence, and we can expect a future verdict based on the evidence. But what may safely be said at this point is that the trafficking of copyrighted works that is alleged in the complaint is precisely the type of criminal conduct that federal law enforcement ought to be targeting. Civil copyright enforcement is typically ill-equipped to deal with mass-scale piracy operations run by criminals whose intent is to evade the law. 

 

Free State Foundation President Randolph May and I address the topic of criminal copyright enforcement in our book, Modernizing Copyright Law for the Digital Age: Constitutional Foundations for Reform (2020).

Report Shows Digital Piracy Spiked in 2022 in the U.S. and Worldwide

Muso's October 2022 report "Piracy Data Overview January 2022 to August 2022" indicates that Internet user visits to digital piracy websites increased 22% compared to a year earlier. That amounted to a staggering 141.7 billion visits to piracy sites for all industries – movies, TV, publishing, music sound recordings, and software. And according to Muso, "the United States accounts for 10.9% of piracy between Jan-Aug 2022" – the highest of any country – with nearly 15.5 billion visits by Internet users in the U.S. to unlicensed streaming, torrent download, web download, and stream-ripping websites. To put those piracy traffic numbers into perspective, the U.S. share of digital piracy reportedly was more than 87% higher than second-place Russia. India and China rank third and fourth among countries for visits to piracy sites.  

The report by Muso – a U.K. data research company that monitors and measures global piracy – compared piracy traffic between January and August 2022 with piracy traffic between January and August 2021. Another stunning finding by Muso is that film piracy traffic grew almost 50% during the period examined in 2022. Piracy traffic involving published content grew close to 40% during that same period. 

 

Digital piracy is wrong and harmful to copyright owners. It unfairly undermines the value of their intellectual property, seriously curbing copyright owners' opportunities to make honest gains on their creative labors. My June 2021 Perspectives from FSF Scholars, "Fighting Online Piracy Will Boost American Economy and Jobs," identified policy priorities that ought to guide Congress and the Biden Administration in combatting online piracy of Americans' copyrighted works. Some of those actions include: (1) insisting on stronger copyright provisions in foreign trade agreements and proactively seeking enforcement of those provisions when foreign countries fail to adequately protect copyrights; (2) prosecuting mass-scale piracy operators for criminal copyright violations; (3) revising the DMCA to establish a "notice-and-stay down" system that would more strongly protect copyrights from online infringements in an era of high-speed broadband and mass social media user uploads. 

 

Private initiatives as well as targeted law enforcement efforts also remain important for disrupting and dismantling the lucrative online advertising streams that fund online piracy websites. For more on that subject, see my August 2021 Perspectives, "Online Ads Supporting Copyright Piracy Need to Be Stopped." And as spotlighted in a blog post from September 19 of this year, malvertising on online piracy websites pose significant cybersecurity dangers to Internet users.  

Report Identifies Dangers to Internet Users from Malvertising and Piracy

On September 15, the Digital Citizens Alliance released a report titled "Unholy Triangle: From Piracy to Ads to Ransomware: How Illicit Actors Use Digital Ads on Piracy Sites to Profit by Harming Internet Users." The report, which the Digital Citizens Alliance prepared jointly with White Bullet and Unit 221B, spotlights the phenomena of online pirates working with "malvertisers" and with the effective assistance of online ad intermediaries to exploit Internet users. 

As the report explains, operators of piracy websites lure Internet users by offering them access to "free" content – including copyrighted movies, TV shows, music sound recordings, and ebooks. But many piracy sites feature a barrage of malicious ads intended to confuse, deceive, or scare Internet users into clicking them. The clicked ads then infect Internet users' computers with malware that can steal their financial and personal information as well as with spyware that can track all of their online activities. The report identifies the creators of these harmful ads as "malvertisers" and it calls their tactics "malvertising."

One particularly pernicious malware-related activity is known as "ransomware." In a ransomware attack, an Internet user's computer files are encrypted and the user is locked out. Cybercriminals then demand payment from the Internet user in order to unlock the files. A source cited by the report estimated that global losses due to ransomware totaled $20 billion in 2021.

 

The report authors investigated many online piracy sites and found ransomware and other malware schemes in operation. According to the report, in just a one-month period, visitors to piracy sites were barraged with an estimated 321 million ads designed to harm them. Indeed, the report found that malvertising accounts for 12% of total ads on piracy sites and generates an estimated minimum of $121 million annually, with more than $68 million coming from U.S. Internet user visits to such sites. 

 

Significantly, these piracy website-hosted malvertising schemes would not be operating without ad intermediaries. In their investigation, the report's authors found that some foreign owned and operated ad intermediaries were willing to place deceptive ads and thereby effectively facilitate malvertising campaigns. The report found that the ad industry has made progress in reducing ads for legitimate companies on piracy sites, and it credits the creation of the Trustworthy Accountability Group (TAG) by U.S. ad associations for helping bring about those reductions. 

 

Copyright piracy is wrong in itself and commercial traffickers in infringing content ought to be the target of federal law enforcement efforts. Free State Foundation President Randolph May and I have written about the harms from online piracy – including the role of online ads in facilitating piracy – which undermines copyright owners' ability to seek financial returns and devalues their intellectual property. But the harms of online piracy don't end there. The "Unholy Triangle" report rightly calls attention to the dangers to unsuspecting Internet users from malware on piracy websites that host infringing content. More Internet users should become aware of those dangers. Hopefully, further efforts will be made by responsible U.S. ad associations and by others to curb the high volumes of malicious ads and the illicit revenue streams that they generate.

"Hot Topics in Copyright Law & Policy" Video Now Available

 

Watch the YouTube video of the Free State Foundation's webinar on current legal and public policy issues in copyright, held July 28, 2022.

 

A panel of prominent copyright experts addressed copyright hot topics such as music royalties, the proposed American Music Fairness Act, needed Digital Millennium Copyright Act reform, problematic state legislation licensing of ebooks, and the American Law Institute's misguided Copyright Restatement project.

 

Participants were Jessica Richard – Vice President, Federal Public Policy, RIAA, Devlin Hartline – Legal Fellow, Hudson Institute's Forum for IP, and Adam Mossoff – Professor of Law, Antonin Scalia Law School, GMU. Free State Foundation Director of Policy Studies & Senior Fellow Seth Cooper moderated the discussion. FSF President Randolph May opened and closed the webinar.

 

Tweet: #FSFCopyright

US Trade Representative Report on Global IP Threats Focuses on China

On April 27, 2022, the Office of the United States Trade Representative (USTR) released the 2022 edition of its annual Special 301 Report (Report). The Report identifies 27 trading-partner nations where the threat to American Intellectual Property (IP) rights is particularly high.

Emphasizing that "[c]ombating … unfair trade policies will encourage domestic investment in the United States, foster American innovation and creativity, and increase economic security for American workers and families," the Report places seven countries – Argentina, Chile, China, India, Indonesia, Russia, and Venezuela – on a "Priority Watch List" and twenty others on a "Watch List."

Among other concerns, the Report focuses on counterfeits, both physical and digital; online and broadcast piracy; trade secret protections; and "indigenous innovation" policies.

China, given statements by government officials suggesting that its approach to IP "should serve the needs of domestic innovation-driven development" at the expense of foreign IP rights holders, receives the lion's share of the Report's attention. Forced technology transfers, onerous licensing terms, IP-centered hacking, counterfeiting, and bad-faith trademarks are just some of the issues specific to China that the Report discusses.

Ukraine, which appeared on the "Priority Watch List" in the 2021 Special 301 Report, is excluded from the 2022 Report in light of its "premeditated and unprovoked further invasion" by Russia earlier this year. Saudi Arabia, meanwhile, was removed from the list after implementing measures to improve its enforcement of IP rights.

The Report also targets the European Union's geographical indications (GI) policies, which can cause problems for certain U.S. trademark holders.

In a March 2022 post to the Free State Foundation's blog, I noted the release of a related USTR annual report, the Notorious Markets List, which "identifies illustrative examples of online and physical markets that reportedly engage in, facilitate, turn a blind eye to, or benefit from substantial copyright piracy and trademark counterfeiting."

Supreme Court Denies Petition in Case Involving State Takings of Copyrighted Property

On March 21, the Supreme Court denied a petition for certiorari in the case of Jim Olive Photography v. University of Houston System. The case involved important and interesting legal issues regarding judicial enforcement of the Fifth and Fourteenth Amendments' prohibitions against state government takings of copyrighted property without just compensation. Unfortunately, the court's denial of the petition means that those issues will have to wait for another time.  

In Allen v. Cooper (2020), the Supreme Court concluded that the Eleventh Amendment generally bars federal courts from hearing infringement claims against state governments. But the Eleventh Amendment does not bar federal courts from hearing claims against states for takings of private property without just compensation or for deprivations of due process. As explained in my December 2021 Perspectives from FSF Scholars, "States Should Not Take Intellectual Property Without Justice Compensation: The Constitution's Fifth and Fourteenth Amendments Protect Copyrights." 

In Jim Olive Photography, the petitioning copyright owner's taking claims were denied by the Texas Supreme Court. He sought an order by the U.S. Supreme Court to vacate that decision and have the lower court reconsider his taking claims in light of the high court's decision in Cedar Point Nursery v. Hassid (2021). In Hassid, the court determined that regulations requiring government access to private property constitute per se physical takings similar to an easement in property because they appropriate the "right to exclude." And the copyright owner in Jim Olive Photography made a well-founded argument a state's appropriation of a copyright owner's exclusive rights, either by making unauthorized reproductions of the work or by publicly displaying it, is analogous to a state's appropriation of a portion of a property owner's land or crops. 

 

The Supreme Court's denial of the petition in Jim Olive Photography is unfortunate for copyright owners whose works have been infringed by state government agencies. But I stand by the legal principles and reasoning about takings of copyrighted property that are set forth in my December 2021 Perspectives:

Copyrights are a type of property that are expressly recognized in the Constitution. This understanding of copyrights as property provides a principled basis for Takings Clause claims when states intentionally or recklessly appropriate exclusive rights in copyrighted property. Such claims also appear consonant with Supreme Court decisions that prohibit states from appropriating personal property and an owner's "right to exclude." The Court should extend its Takings Clause jurisprudence to include takings of copyrighted property. 

Foreign Stream Ripping Operation Loses Big in U.S. District Court

On February 11, the U.S. District Court for the Eastern District of Virginia entered an order in UMG Recordings, Inc. v. Kurbanov, awarding copyright holders nearly $83 million in statutory damages against two of the world's most high-trafficked websites offering stream-ripping services. Plaintiff copyright owners also received an award of costs and statutory attorney fees, as well as a preliminary injunction against the stream-ripping operation. The respondent in the case owns stream-ripping websites that unlawfully convert copyrighted sound recordings into stored electronic files and makes copies downloadable by users across the world, including about 1.5 million users in Virginia. The websites generate ad revenues targeted to its large user base. 

The District Court's order from February 11 followed an October 2021 default judgment order, as well as a March 2021 order on remand from the Fourth Circuit in which the District Court concluded that its exercise of jurisdiction over the foreign website owner satisfied constitutional due process concerns. My blog post from June 2020 analyzed the Fourth Circuit's opinion that recognized the District Court's specific personal jurisdiction in the case. 

It may be very difficult for the copyright owners in in UMG Recordings, Inc. v. Kurbanov to collect on their judgment against the owner of the stream-ripping websites. But as explained in my June 2020 blog, the Fourth Circuit's decision may serve as a precedent that will bolster the prospects for copyright owners in pursuing civil justice against online piracy in future cases. 

Free State Foundation President Randolph May and I wrote about the importance of efforts to combat online copyright infringement, including by stream-ripping websites, in our June 2021 Perspectives from FSF Scholars, "Fighting Online Piracy Will Boost American Economy and Jobs."

2021 List of Notorious Piracy, Counterfeiting Markets Released

On February 17, 2022, the Office of the United States Trade Representative (USTR) released the eleventh edition of the Notorious Markets List (NML), its annual overview of the most glaring hotbeds, virtual and physical, for counterfeit goods and pirated content.

Officially titled the "2021 Review of Notorious Markets for Counterfeiting and Piracy," this most-recent NML provides a summary of markets "that reportedly engage in, facilitate, turn a blind eye to, or benefit from substantial piracy or counterfeiting."

The NML, which incorporates responses from the public to a Request for Comments published in the Federal Register in August of last year, is designed "to increase public awareness and help market operators and governments prioritize intellectual property enforcement efforts that protect American businesses and their workers."

(Incidentally, the NML is separate from, but related to, USTR's "Special 301 Report," a congressionally mandated yearly summary "of the global state of intellectual property (IP) rights protection and enforcement.")

The theft of copyrighted material is a serious criminal problem with massive financial implications for creative industries. Citing a U.S. Chamber of Commerce report, the NML notes that piracy "in 2019 cost the U.S. economy an estimated $29.2 billion in lost revenue." Accordingly, one of the goals of the NML is to "motivate appropriate action by the private sector and governments to reduce piracy and counterfeiting."

The 2021 edition of the NML highlights 42 online destinations and 35 geographic locations where the manufacture of counterfeit goods and the theft of copyrighted material run most rampant. The latter includes applications like Popcorn Time ("Known as the 'Netflix of piracy'") and websites such as ThePirateBay ("the most frequently visited bittorrent index site in the world").

In addition, the NML reports on enforcement-related developments, concluding that there have been "notable efforts" and "impressive results" in the ongoing fight to rein in online piracy enabled by Internet protocol television (IPTV) apps and physical illicit streaming devices (ISDs).

However, the NML also acknowledges commenters' serious concerns regarding the existence and continued evolution of what it describes as a "complex ecosystem" facilitating efforts to steal, and profit from, copyrighted content. One that includes "domain name registries and registrars, reverse proxy and other anonymization services, hosting providers, caching services, advertisers and advertisement placement networks, payment processors, social media platforms, and search engines."

A related development of heightened concern involves what the NML describes as "piracy-as-a-service" – that is, comprehensive wholesale offerings that make it even easier for a would-be pirate by providing all of the required tools: "website templates that facilitate the creation of streaming websites, databases of infringing content, dashboards that allow a pirate IPTV operator to oversee the infrastructure of their service, IPTV panels used for generating and distributing playlists of pirate IPTV channels, and hosting providers that specialize in servicing infringers."

Court Rejects Copyright Infringement Immunity Defense in Locast Case

On August 31, a U.S. District Court rejected the affirmative defense that the Locast service that retransmits over-the-air broadcast TV signals to viewers via Internet livestreaming is exempt from liability for copyright infringement. Section 111(a)(5) of the Copyright Act exempts from liability secondary transmissions or displays by a government body or other nonprofit organization "without any purpose of direct or indirect commercial advantage, and without charge to the recipients of the secondary transmission other than assessments necessary to defray the actual and reasonable costs of maintaining and operating the secondary transmission service." The Locast service is offered by a non-profit entity, and it offers free access to streams of broadcast channel content, subject to a fifteen-second commercial every fifteen minutes. Users who donate $5 or more per month or who claim financial hardship can receive uninterrupted access. 

In ABC, Inc. v. Goodfriend, the U.S. District Court for the Southern District of New York concluded that Locast was not offered without charges other than those necessary to defray the actual reasonable costs for its service. The District Court characterized the user donations as "charges" for avoiding interrupted service. It also found that Locast generated far more money in 2020 from those user charges than was necessary to defray its service costs. Additionally, the District Court rejected the idea that reinvesting money to expand service fit within the statutory exemption since Congress could have expressly allowed for costs of expanding service – but it chose not to. 

The District Court's order addressed only the legal question about the affirmative defense based on Section 111(a)(5), so it did not directly address infringement liability or any other issues. Thus, the case is not over at the District Court. And as of this blog post, there is no word yet as to whether the order will be appealed. 

Court Rules for Copyright Owners on Infringements by Streaming Music Service

Copyright owners of sound recordings secured a significant win in Atlantic Recording Corp. v. Spinrilla, LLC. The decision by the U.S. District Court for the Northern District of Georgia was issued on November 30. At issue in the case was an online streaming and downloading service offering mixtapes that in many instances contained copyrighted sound recordings. Plaintiff copyright owners filed infringement claims against Defendants Spinrilla and its owner involving 4,082 works. 

The District Court's decision in Spinrilla rightly recognized that an online service provider is liable for direct infringement for unauthorized Internet streaming of a copyrighted sound recording at the request of its user. In particular, the court determined that a sound recording constitutes a public performance of a copyrighted work. According to the court, the "reasoning and interpretation of the language and underlying purpose of the Copyright Act" – reflected in the U.S. Supreme Court's decision in ABC v. Aereo, Inc., 573 U.S. 431 (2014) – "apply equally to online music streaming services such as Spinrilla's and is consistent with a number of Circuit and district court decisions." The court also observed that "online music streaming services are not among the specific examples of activities the Aereo Court expressly noted fell outside the reach of its holding."

 

Although the Eleventh Circuit has not squarely addressed whether direct infringement claims require a copyright owner establish so-called "volitional conduct" by the alleged infringer, the court wrote that "even if volitional conduct is required to prove direct infringement, the cases on which Plaintiffs rely have all held that the affirmative act of streaming constitutes direct infringement of the copyright holder’s exclusive right of performance regardless of the fact that the the [sic] streaming occurs at the request of the user." 

 

Free State Foundation President Randolph May and I have addressed the issue of the volitional conduct requirement in infringement cases in two Perspectives from FSF Scholars papers: "The Constitutional Foundations of Strict Liability for Copyright Infringement" and "Volition Has No Role to Play in Determining Copyright Infringements."  In this case, the District Court's articulation of the doctrine – based on the assumption that it applies – appears reasonable.

 

Additionally, the District Court correctly concluded that an online service provider that seeks legal immunity from infringement claims under the Digital Millennium Copyright Act of 1998 must first register an agent for receiving takedown notices with the U.S. Copyright Office. Defendants in the case did not register their agent with the Copyright Office until after Plaintiffs filed their lawsuit, and so the Court determined the defendants were ineligible for DMCA safe harbors for the infringements. 

 

In June 2020, FSF President May and I addressed needed reforms to the safe harbors provision in our Perspectives paper "Copyright Office Report Should Spur Modernizing the DMCA."

 

The District Court in Spinrilla has yet to make a judgment on damages.