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.  

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."

Consumer Survey Shows the Dangers of Malware from Video Piracy

A survey released on June 22 by the U.S. consumers by the Digital Citizens Alliance offers additional evidence of the strong link between video piracy and malware. According to the Digital Citizens Alliance, 13% of respondents admitted to using devices like Kodi boxes or jail-broken Amazon Firesticks to view pirated copies of copyrighted movies and TV shows. Of those users of piracy devices, 49% reported experiencing malware in the last year and 25% reported a malware problem in the prior three months. Check out the Digital Citizens Alliance website – including its handy infographic – for more on the survey's findings.

In a June blog post, I noted the dangers of malicious software to users of illicit streaming devices and illegal IPTV services. Those dangers were the issue focus of the U.S. Trade Representative's 2019 Review of Notorious Markets Report. FSF President Randolph May and I also addressed the dangers of malware to users of illicit streaming devices and illegal IPTV services in our newest book, Modernizing Copyright Law for the Digital Age – Constitutional Foundations for Reform.

Piracy of copyrighted video content is violation of the exclusive property rights of copyright owners, and therefore wrong in itself. But as the Digital Citizens Alliance's survey reminds us, video piracy also poses harms to the viewers of pirated content.

Report Finds Streaming Piracy Poses Cybersecurity Dangers to Consumers

The Digital Citizens Alliance has just published an important investigative report titled "Fishing in the Piracy Stream: How the Dark Web of Entertainment is Exposing Consumers to Harm." The report calls needed attention to the cybersecurity dangers posed to users of illicit streaming devices (ISDs) and piracy apps designed to stream pirated movies, TV episodes, and live video programming content via the Internet. As the report observes, many downloadable piracy apps and apps that are pre-installed in ISDs contain malware. The malware steals user names and passwords, scans user networks, and uploads user data without their knowledge. 

The report's findings are further described in Digital Citizens' press release.

Cybersecurity dangers posed by ISDs and piracy apps were a focus point in the US Trade Representative's 2017 Notorious Markets Report, which I blogged about here. Free State Foundation President Randolph May and I also touched on the problems posed by ISDs and stream-ripping sites and the need for stronger measures to combat them in our Perspectives from FSF Scholars paper, "Modernizing Criminal Copyright Law to Combat Online Piracy."

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.