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."

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."

New Paper by Copyright Law Experts Takes on Copyright Infringements by States

On May 13, the Regulatory Transparency Project published a paper titled "Holding States Accountable for Copyright Piracy." The paper was co-authored by a distinguished group of copyright experts: Alden Abbott, Kevin Madigan, Adam Mossoff, Kristen Osenga, and Zvi Rosen. Professor Mossoff is a member of the Free State Foundation's Board of Academic Advisors. This paragraph from the introduction sets forth the paper's purpose: 

This paper identifies how copyright law and sovereign immunity came into conflict recently, explains why this conflict matters, and proposes a solution: Congress should enact new legislation that holds states accountable for when state officials pirate the fruits of creative labors of citizens by stealing their copyrighted works. 

The conflict alluded to is the result of the Supreme Court's decision in Allen v. Cooper (2020). Along with a discussion of legal principles and copyright case law, the paper profiles some specific cases in which states or state entities infringed on copyrights and inflicted serious harms on copyright owners but escaped legal liability under copyright law. 

For another discussion of Allen v. Cooper and the need for a legislative response to shore up protections for copyright owners, see my July 2020 Perspectives from FSF Scholars paper, "Congress Should Stop States From Infringing Copyrights." States should not be financially responsible for copyright infringement just like everyone else, and Congress should seek ways to ensure that justice is served when states infringe copyrights.

The U.S. Copyright Office is currently undertaking a study of the copyright infringements and state sovereign immunity. The Office's study is expected to produce a report for public release later this year. 

Online Piracy Poses Substantial Malware Threat to Employer Networks via Remote Access

Digital Citizens Alliance, a nonprofit focused on the threats consumers face on the Internet, has released a research survey highlighting a disturbing connection between online piracy, working from home, and employer network security threats.

As a consequence of the COVID-19 pandemic, millions of Americans are working remotely. When employees allow piracy devices and apps to access their home Internet connections, they open the door to malware attacks.

Alarmingly, it appears that a significant number of consumers do just that: 1 in 5 of those surveyed admitted to visiting a piracy website, 1 in 10 to using a piracy device.

Home networks that include piracy devices, or other devices running piracy apps, are three times more likely to experience issues relating to malware, which in turn expose the employer networks that they are used to access to cybersecurity risks.

Such concerns are particularly troubling with respect to those employees remotely accessing systems upon which confidential or sensitive data is stored.

Fully half of the respondents with access to such information and piracy devices attached to their home networks had issues relating to malware during the previous 12 months. By contrast, less than 20 percent of those not using piracy devices reported malware infections.

MPA on USMCA: Facilitates Growth

The statement below from Charles Rivkin, the head of the Motion Picture Association, is important, and especially for what it says about the size of the exports by US film, television, and streaming businesses. $17.2 billion annually is a lot of money that translates into a lot of jobs. I can't vouch for the number, but assuming as I do that it is fairly accurate, the case for taking actions to reduce piracy is self-evident! 

FOR IMMEDIATE RELEASEJanuary 16, 2020

Statement from Charles Rivkin on USMCA Passage in the Senate     

WASHINGTON  -- The United States Senate today passed the United States-Mexico-Canada Agreement (USMCA). The trade bill now heads to the President’s desk for signature.

The following is a statement from Motion Picture Association Chairman and CEO Charles Rivkin:

“The Motion Picture Association applauds the Senate for passing the USMCA today. Currently, the U.S. film, television, and streaming content industry accounts for $17.2 billion annually in exports and registers a positive trade balance with nearly every country in the world. The USMCA will help the future of our industry look brighter, particularly in Mexico. This deal includes provisions that facilitate the growth of the legal, digital market for creative content while improving tools to address the threat of online piracy, which costs the industry up to $71 billion of revenue lost annually. Future trade deals should account for the constantly changing digital landscape, and we look forward to working with the Administration to build on USMCA and further improve protections for our creative economy. I would like to thank the President, Ambassador Lighthizer, Leader McConnell and Speaker Pelosi for their leadership for passing this important trade agreement.”

USTR Issues Two Important IP Reports

Piracy of intellectual property (IP) remains a major global problem, and it is important that the United States, along with governments around the world, maintain – and in many cases – strengthen efforts to combat such illegal conduct.

To that end, two reports released by the United States Trade Representative in connection with #WorldIPDay on April 26 contribute to an understanding of the scale of the piracy problem and the need to take measures to combat it. pertaining to global intellectual property rights in advance of World IP Day, which is celebrated on April 26. The USTR’s 2018 "Out-of-Cycle Review of Notorious Markets Report" identifies markets around the world that engage in and facilitate copyright piracy. And USTR's "Special 301 Report" is an annual review of the state of IP rights protection and enforcement globally.

Pasted in below is the statement of MPAA Chairman and CEO Charles Rivkin regarding the release of the two USTR reports:

“The film and television industry is a community of millions of creators and innovators whose daily work in the business and art of storytelling entertains and inspires audiences worldwide. In the United States alone, the industry employs 2.6 million Americans and contributes hundreds of thousands of dollars into local economies every day. The industry also generates a trade surplus with every major economy across the globe, producing a $10.3 billion aggregate surplus. Ahead of World IP Day tomorrow, the USTR rightfully shines a light on the foreign threats to our creative economy, specifically around online content theft.

“The Notorious Markets report makes it clear how criminals are profiting on the backs of American workers in our creative economy. In addition, the Special 301 report underscores this Administration’s commitment to protecting those workers’ intellectual property from those threats. 

“Today’s reports highlight the global nature of piracy and demonstrate that all governments need to do their part in protecting intellectual property, fostering legitimate commerce, and protecting creators. We applaud Ambassador Lighthizer and the USTR staff for doing their part in recognizing some of the most critical challenges and committing to address them. We look forward to continuing our work with them to protect intellectual property rights and grow our creative economy.”

Policymakers should be committed to protecting IP rights every day, of course. But surely World IP Day should be an occasion to recommit to that end."

Strong Property Rights Lead to Economic Prosperity

In July 2017, the Property Rights Alliance at Americans for Tax Reform published the 2017 International Property Rights Index (IPRI), ranking 127 countries around the world based on the strength of both physical and intellectual property rights. The 2017 edition comprises over 98% of global gross domestic product (GDP) and over 93% of the world’s population. Importantly, the IPRI finds that property rights are a defining factor impacting a country’s investment, entrepreneurship, and economic prosperity.

The International Property Rights Index includes three core components (legal and political environment, physical property rights, and intellectual property rights) and ten corresponding categories. The legal and political environment component includes judicial independence, rule of law, political stability, and control of corruption. The physical property rights component includes the protection of such rights, the ability to register property, and the ease of access to loans. The intellectual property rights component includes the protection and enforcement of such rights, strength of patent protections, and the level of copyright piracy. Using data from other international indices, the IPRI compiles these scores into a 0-10 scale for each of the 127 countries.

New Zealand ranks highest with a score of 8.63, followed by Finland and Sweden with scores of 8.62 and 8.61, respectively. The United States ranks 14^th with a score of 8.07, moving up from 15^th in 2016 when it scored a 7.74. On the other hand, the bottom three countries are Bangladesh, Venezuela, and Yemen, with scores of 3.12, 3.06, and 2.73, respectively.

Significantly, the Index provides insight into correlations between IPRI scores and many economic outcomes. Free State Foundation scholars often have stated that strong protection of property rights, specifically strong protections of intellectual property rights, will foster creativity, innovation, and economic growth. The strong positive correlations found in the IPRI are consistent with those statements. For example, IPRI scores have a correlation coefficient of 0.814 with GDP per capita, 0.764 with gross capital formation per capita, and 0.878 with global entrepreneurship. Other strong positive correlations include a 0.857 coefficient with networked readiness/connectivity, 0.801 with civic activism, and 0.768 with overall economic freedom.

With these robust positive correlations, it should not be a surprise that the top 20% of countries in the IPRI have an average GDP per capita of over $57,000, while the bottom 20% of countries have an average GDP per capita of just over $4,500.

The IPRI, in addition to the U.S. Chamber of Commerce’s Global Intellectual Property (IP) Center’s 2017 edition of the International IP Index, provide U.S. policymakers a useful tool for assessing how to improve our country’s physical and intellectual property rights systems. (See this February 2017 blog.) Providing strong protections to property rights is a principle embodied in the U.S. Constitution and improving such protections will enhance creativity and innovation and foster economic growth. (For much more concerning foundational principles supporting IP rights protections in the United States, please read “The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective” by FSF President Randolph May and Senior Fellow Seth Cooper.)

Additionally, policymakers in the countries which rank towards the bottom, such as Venezuela or Yemen, should use these indices to their advantage. From the correlations cited above, it is clear that strong physical and intellectual property rights foster innovation and economic prosperity. As undeveloped and developing countries continue to improve their property rights protections, U.S. companies will be more inclined to expand international trade into those countries, creating economic opportunities in impoverished parts of the world. Robust property rights reduce poverty by incentivizing economic activity because entrepreneurs understand that their innovations and earnings will be protected.

Finally, the U.S. must continue to be a leader throughout the world by participating in trade agreements that contain effective provisions that support protection of property rights. As more countries adopt strong property rights through trade agreements, the global economy will grow substantially because mutual gains from international trade are much higher when participating countries adopt and enforce laws that protect physical and intellectual property rights.

New White House Report Promotes Enforcement of IP Rights

On December 12, 2016, the White House’s Office of the U.S. Intellectual Property Enforcement Coordinator (IPEC) published a report entitled “Supporting Innovation, Creativity and Enterprise: Charting a Path Ahead,” which promotes strengthening the enforcement of IP rights in the U.S. and abroad for the next three years.

The IPEC submits a joint strategic plan to Congress every three years under the Pro-IP Act of 2008. The Pro-IP Act outlined the following objectives for the joint strategic plan:

• Reduce counterfeit and infringing goods in domestic and international supply chains;

• Identify unjustified impediments to effective enforcement action against the financing, production, trafficking, or sale of counterfeit or infringing goods;

• Support the sharing of information to curb illicit trade;

• Disrupt domestic and international counterfeiting and infringement networks;

• Strengthen the capacity of other countries to protect and enforce intellectual property rights;

• Establish with other governments international standards and policies for the effective protection and enforcement of intellectual property rights; and

• Protect intellectual property rights overseas by enhancing international collaboration and public-private partnerships.

With those objective in mind, the joint strategic plan for FY 2017-19 sets goals including: (1) enhance national understanding of economic and social impacts from trade secrets misappropriation and IP rights infringement; (2) minimize counterfeiting and IP-infringing activity online; (3) secure and facilitate lawful trade; and (4) enhance domestic strategies and global collaboration.

IPEC Daniel Marti should be commended for the new report. Not only does it recognize the impact that strong protections of IP rights has had on U.S. GDP ($6.6 trillion value added), but it addresses key ways that IP rights can be strengthened including: curbing illicit efforts with innovative enforcement techniques; increasing the ability of consumers to recognize illegal content and goods; and using trade agreements to promote strong global IP rights.

Utilizing various means to enforce rights enables artists and creators to earn a return on their labor and incentivizes innovation and economic activity around the world.

Pirated CDs Still a Costly Copyright Problem

An October 30 article in the Wall Street Journal [subscription required] regarding the extent to which pirated CDs sold on the Internet unjustly harm artists and record labels is well worth reading. Here's the beginning:

"Even in the digital era there are plenty of music fans who still buy old-fashioned compact discs for more than $10 a pop. But the money that shoppers have been spending on CDs lately hasn’t necessarily been going to the artists and record labels who created the music.

In the latest challenge for the battered music industry, pirates are flooding Amazon.com Inc. and other online retailers with counterfeit CDs that often cost nearly as much as the official versions and increasingly are difficult to distinguish from the real goods."

More needs to be done to stop, or at least greatly reduce, such piracy.

"Walking Dead" Producer Fears FCC's Set-top Box Proposal

Today, “Walking Dead” producer Gale Ann Hurd published an op-ed in USA Today expressing concern over the FCC’s recent proposal to regulate set-top boxes. Ms. Hurd explains that the FCC’s proposal would require set-top boxes to show and prioritize illegal content alongside legal content. She says the proposal “will make piracy as easy and dangerous in the living room as it is on laptop and mobile devices.”

Ms. Hurd hits the nail on the head. In a February 2016 blog, FSF Senior Fellow Seth Cooper stated that the FCC’s proposal to “unlock the box” would actually unlock copyright protections for video content.

Additionally, in a February 2016 Perspectives from FSF Scholars entitled “FCC’s Cognitive Dissonance Leads to Regulatory Policy Run Amok,” FSF President Randolph May revealed that in June 2015 the Commission found local video markets to be effectively competitive, but now, just seven months later, the FCC proposes regulations. Despite what FCC Chairman Tom Wheeler claims about the video device market, a look at set-top box prices shows no monopoly power. In fact, as we showed in a recent infographic, consumer choices in the video market continue to grow because of market-driven innovation and technological advances.

As Ms. Hurd states in her op-ed, most people agree that piracy is a serious problem. And if you can agree that piracy is a serious problem, then it should be obvious that the FCC should not adopt regulations that would enable the posting and dissemination of illegal content.

Four Reasons to Reject Piracy of Movies

If you haven't seen Rob Atkinson's response in HuffPo to a piece by Reason's Nick Gillespie defending, if not extolling, piracy of movies, then you really should. Rob's piece is titled, "No, Piracy Is Not the Sincerest Form of Flattery."

Rob makes these excellent points in response to Gillespie's wrong-headed defense movie piracy:

• "First, these films were pirated because they were popular, not the other way around."

•  "Second, Gillespie's claim that filmmakers rarely lose money to piracy is patently false."

•  "Third, Gillespie's argument that piracy helps keep movies circulating in the public 'long after the industry PR machine has shut down' ignores the bevy of legal alternatives that consumers have to easily find legal versions of just about any content they want."

• "Finally, one would expect the editor of a libertarian publication like Reason to not only respect the property rights of content holders, but also to respect the free market."

In support of this last point I was pleased, and grateful, that Rob referred to the new book, The Constitutional Foundations of Intellectual Property - A Natural Rights Perspective, co-authored by Seth Cooper and me. In our book, I think we demonstrate that, in large part, the Founders were motivated to include the Intellectual Property Clause in the Constitution to protect the fruits of the labors of authors and inventors and other creators -- which fruits, as a matter of natural right, become the property of those who labor to them.

One of our chief motivations in writing the book was to invite those who call themselves conservatives, libertarians, constitutionalists, or the like -- but, who, for whatever reason, don't respect IP rights -- to consider the reasons why the IP Clause is included in the Constitution and to respect intellectual property just like other forms of property. And surely not to dismiss the need to safeguard intellectual property just because it finds its way online.

I respect Nick Gillespie, I've read many of his works, and I share some of his views. But I certainly don't agree with his paean to piracy of IP, and I don't see how it is in any way compatible with a respect for property rights and a functioning free market.

It's No Longer Popcorn Time for IP Piracy

The Wall Street Journal reports in an article [subscription required] published on November 3 that a Canadian court granted a Motion Picture Association of America request for an injunction against Popcorn Time, a notorious website for pirated movies and TV shows.

The fight against pirated movies and music is ongoing. Shutting down another popular website known for facilitating the sharing of pirated content certainly won't end the war against piracy of intellectual property. Nevertheless, it is important, not only because of the direct effect of taking down Popcorn Time but because of the message it sends.

Content providers such as movie studios and recording companies have invested much time and financial resources educating the public regarding access to lawful content. These efforts include the WheretoWatch.com website and others.

And it is crucial to continue efforts to educate the public concerning the reasons why our Founders thought protection of intellectual property rights important enough to include in the Constitution. This explicit constitutional protection alone ought to be reason enough for law-abiding citizens to refrain from downloading illegal content.

My new book, co-authored with my Free State Foundation colleague Seth Cooper, The Constitutional Foundations of Intellectual Property - A Natural Rights Perspective, is, in the words of former Solicitor General of the United States Paul Clement, "an essential volume for anyone who cares about the Constitution and intellectual property."

I certainly can't -- and won't -- argue with Mr. Clement's statement that: "The Framers thought intellectual property was important enough to provide for its protection expressly in the Constitution. This book provides invaluable insights into the Framers' decision and should inform contemporary debates about the nature of that protection."  

Executive Producer of "Hannibal" Wants Profit Out of Piracy

On August 12th, Martha De Laurentiis, Executive Producer of the television show “Hannibal,” wrote an op-ed in Ad Age entitled “Marketers: Stop Advertising on Pirate Sites.” In it, she speaks out against ad-supported piracy and tells a story about how online piracy directly affects her job:

My own show, "Hannibal," was the fifth most-stolen TV show during its first season on the air, despite being available for legal digital streaming the very next day. While I appreciate the enthusiasm of our fans, as executive producer I am responsible for all production costs for the show. Piracy directly affects my bottom line, including the wages for hundreds of cast and crewmembers.

Ms. De Laurentiis is a proud member of the Leadership Committee of CreativeFuture, a coalition of more than 400 companies and organizations in the creative industries. CreativeFuture recently launched a letter-writing campaign directed at major companies whose ads routinely appear on websites which facilitate access to illegal content. In her op-ed, Ms. De Laurentiis said “most advertisers are unaware that their ads appear on pirate sites,” so simply warning them is a good first step. And because many of these global brands have reputations to protect, CreativeFuture’s efforts will help remove advertising revenue from pirate websites. Ms. De Laurentiis declared that “[w]ithout their ad dollars, we can take the profit out of piracy.”

In a May 2015 blog entitled “Ad-Supported Piracy Remains a Serious Problem,” Free State Foundation President Randolph May cited a Digital Citizens Alliance report which found that a sample of 589 pirate websites generated an estimated $209 million in aggregate annual revenue from advertising in 2014. But while the problem is still large, Mr. May is optimistic because there was an $18 million decrease in illegal aggregate ad revenue from 2013 to 2014. This decrease may be attributable to several voluntary initiatives which help to fight online piracy and intellectual property infringements. Brand Integrity Program Against Piracy, WheretoWatch.com, Rightscorp, and now CreativeFuture have emerged to aid consumers in finding legal content and in raising awareness about websites, enterprises, and advertisers that violate intellectual property rights.

Diminishing ad-supported piracy is important to help ensure that content providers, artists, innovators, and marketers can earn a return on their creative works - incentivizing more innovation, investment, and economic growth. 

Message to Google: Don't Be Inconsistent - Part II

On August 10, the federal appeals court heard oral argument in an appeal from a near-unanimous decision of the International Trade Commission holding that certain digital transmissions are “articles” within the agency’s jurisdiction. The Wall Street Journal’s report by Jess Bravin on the appeals court argument is here. 

I wrote about this case back in July in my blog, “Message to Google: Don’t Be Inconsistent.” The blog provides the background information needed to understand the importance of the case – in other words, why it matters whether the ITC’s determination that it possesses authority to prevent the importation of digital goods that violate intellectual property rights is upheld or not. 

As I concluded in my blog:
  

“[I]t also should be emphasized that unless the ITC’s interpretation of the meaning of “articles” in the Tariff Act is clearly wrong, it makes sense for the statute to be construed to grant the agency authority to prevent importation of infringing digital data as well as infringing physical goods. After all, digital content comprises an increasingly large portion of international trade. Indeed, the Progressive Policy Institute has just released a new report titled 'Uncovering the Hidden Value of Digital Trade: Towards a 21^st Century Agenda of Transatlantic Prosperity.' Not surprisingly, the report’s summary concludes: 'More and more, global trade has come to rely on a vital commodity: data.' In the digital age, reading the protection of digital data out of the ambit of the ITC’s authority would significantly shrink its ability to prevent the importation of pirated copyrighted works and patents.” 

A principal purpose of my earlier blog was to point out the seemingly inconsistent positions taken by Google and its allies, depending on the forum and the timing of their assertions, with regard to whether the ITC should be able to prevent the importation of pirated goods in the form of digital transmissions. Now they oppose ITC jurisdiction, while back during the SOPA fight in Congress, they pointed to the ITC as a proper venue for preventing unlawful digital transmissions from entering the country. 

I think there is a good argument as a matter of law that the ITC’s decision should be upheld. And there are certainly sound policy reasons, when so much of our international trade involves intellectual property in digital format, to hope that the appeals court agrees the ITC’s decision should be sustained. 

But if the courts ultimately disagree, then this is a matter Congress likely will need to consider.

“House of Cards” Illegally Distributed Throughout the World

On Friday February 27^th, Netflix released the third season of “House of Cards” for subscribers to binge watch over the weekend. However, according to Variety, almost 700,000 people illegally downloaded the show’s newest season within the first 24 hours of its release. This is twice as many pirates (or illegal downloaders) as the show’s second season and the distribution of downloads was spread throughout the world.

Top ten nations with illegal downloaders of “House of Cards” Season Three:
1. China – 60,538
2. US – 50,008
3. India – 47,106
4. Australia – 40,557
5. Poland – 37,552
6. UK – 32,703
7. Canada – 27,584
8. France – 27,151
9. Greece – 20,551
10. Netherlands – 20,402

I would think that Netflix’s content would be pirated less often than most video content, because users can view it anytime and because Netflix allows up to four devices to stream from the same account at the same time. However, residents of five of the top ten countries –China, India, Australia, Poland, and Greece – do not have access to Netflix’s service yet.

Some of these countries do not rank very high in the Global IP Center’s International IP Index, so while an expansion of Netflix’s service could help diminish the number of illegal downloaders, it would not completely eliminate it. Of course, this is obvious because the United States, which ranks first in the International IP Index and where Netflix’s service is prevalent, had the second most illegal downloaders.

Theft of intellectual property should never be excused. With that said, more ubiquitous access to Netflix’s offerings on a legal basis might disincentivize people from pirating content. Not only might Netflix benefit from expanding its service, but artists and creators throughout the world would have a greater incentive to produce more content as piracy decreases.

As for the piracy that is occurring despite access to Netflix’s service, ongoing tools and initiatives, such as WheretoWatch.com, Rightscorp, and Brand Integrity Program Against Piracy, are working to reduce the size and scope of illegal content markets. (See this FSF blog for more.)

Netflix does have a plan in place to reach 200 countries by 2017, and hopefully, if implemented, it will reduce the amount of pirated content in the future. Strong IP rights are important for ensuring that content providers, artists, innovators, and marketers can earn a return on their ideas and labor, incentivizing more innovation, investment, and economic growth.  

New Initiative Emerges with Goal of Diminishing Ad-Supported Piracy

The Trustworthy Accountability Group (TAG) recently launched what it is calling the Brand Integrity Program Against Piracy. The program will coordinate with companies in need of advertising and reliable advertising agencies in an attempt to diminish the number of advertisements that appear on websites which facilitate access to illegal content or counterfeit goods.

The Brand Integrity Program Against Piracy was supported at its launch by the U.S. Chamber of Commerce and a several organizations and companies involved in advertising, online publishing, advertising technology, media, and consumer protection, including: 

• Advertising: Association of National Advertisers (ANA), American Association of Advertising Agencies (4A’s), Interactive Advertising Bureau (IAB), GroupM Interaction

•  Advertising Technology: Collective, DoubleVerify, Integral Ad Science, L-3 and MiMTiD, sovrn, Veri-Site, whiteBULLET

• Media: Recording Industry Association of America (RIAA), Motion Picture Association of America (MPAA), Independent Film & Television Alliance (IFTA), CreativeFuture, Copyright Alliance

• Consumer Protection: International AntiCounterfeiting Coalition (IACC)

Any advertising agency that wants to participate in TAG’s new initiative can do so by using validated tools and services to identify and prevent advertising from running on websites which violate core IP principles.

TAG will also work with third party validators, such as Ernst & Young and Stroz Friedberg, to certify ad agencies as “Digital Advertising Assurance Providers” (DAAPs). In order to be certified as a DAAP, advertising agencies must be able to identify ad risk entities, prevent advertisements on undesired ad risk entities, detect, prevent or disrupt fraudulent or deceptive transactions, and eliminate payments to undesired ad risk entities. Once an ad agency is certified as a DAAP, it can work with companies to ensure that their ads do not end up on websites with illegal content.

This is a very important initiative considering there has been a rise in the number of ad-supported piracy websites. The Digital Citizens Alliance released a February 2014 report entitled “Good Money Gone Bad,” concluding that websites selling advertising against illegal content make roughly $227 million in annual ad revenue. The largest Bit Torrent websites are making more than $6 million a year, but even some of the smallest websites make more than $100 thousand a year.

While it is hard to estimate how much of this ad revenue is lost to the original artists and brand owners, even a $1 loss to innovators and entrepreneurs due to theft of IP is very unfortunate. This initiative and other private tools, such as WheretoWatch.com and Rightscorp, are a step in the right direction towards diminishing the size and scope of online piracy and the sale counterfeit goods and content.

Strong IP rights are important for ensuring that content providers, artists, innovators, and marketers can earn a return on their ideas and labor, incentivizing more innovation, investment, and economic growth.  

"The Walking Dead" Has Millions of Pirates

The midseason premiere of AMC’s hit show “The Walking Dead” set a new record for the series in terms of illegal downloads. Variety reported that within 20 hours of the February 8^th premiere approximately 1.29 million Internet addresses had pirated the episode. Although HBO’s “Game of Thrones” season four premiere has the record with 1.86 million pirated copies within 24 hours of the debut, “The Walking Dead” seems to be the second most pirated show.

It is unfortunate that these pirate parties continue to occur and in record-setting fashion. (See here and here.) Innovative tools, such as WheretoWatch.com and Rightscorp, have emerged in order to diminish piracy and protect intellectual property rights. But as long as these unfortunate events continue to occur, new efforts should be made to severely diminish the size and scope of theft of intellectual property. The protection of intellectual property rights is essential for encouraging more innovation, creative content, and economic growth, because it gives individuals the ability and incentives to provide valuable goods and services for consumers.

Variety’s Top 20 Most Pirated Movies of 2014

Variety released a list on Sunday of the top 20 most pirated movies in 2014. “The Wolf of Wall Street” and “Frozen” were the two most pirated movies at roughly 30 million illegal downloads each.

The total number of illegal downloads from this list is almost half a billion pirated copies in 2014 alone. The rest of the list looks like this:

1. “The Wolf of Wall Street”: 30.035 million (Paramount, Dec. 25, 2013)
2. “Frozen”: 29.919 million (Disney, Nov. 27, 2013)
3. “RoboCop”*: 29.879 million (MGM, Feb. 12, 2014; and Orion, July 17, 1987)
4. “Gravity”: 29.357 million (Warner Bros., Oct. 4, 2013)
5. “The Hobbit: The Desolation of Smaug”: 27.627 million (Warner Bros., Dec. 13, 2013)
6. “Thor: The Dark World”: 25.749 million (Disney/Marvel, Nov. 8, 2013)
7. “Captain America: The Winter Soldier”: 25.628 million (Disney/Marvel, April 4, 2014)
8. “The Legend of Hercules”: 25.137 million (Summit, Jan. 10, 2014)
9. “X-Men: Days of Future Past”: 24.380 million (20th Century Fox, May 23, 2014)
10. “12 Years a Slave”: 23.653 million (Fox Searchlight, Oct. 18, 2013)
11. “The Hunger Games: Catching Fire”: 23.543 million (Lionsgate, Nov. 22, 2013)
12. “American Hustle”: 23.143 million (Sony/Columbia, Dec. 13, 2013)
13. “300: Rise of an Empire”: 23.096 million (Warner Bros., March 7, 2014)
14. “Transformers: Age of Extinction”: 21.65 million (Paramount, June 27, 2014)
15. “Godzilla”: 20.956 million (Warner Bros., May 16, 2014)
16. “Noah”: 20.334 million (Paramount, March 28, 2014)
17. “Divergent”: 20.312 million (Lionsgate, March 21, 2014)
18. “Edge of Tomorrow”: 20.299 million (Warner Bros., June 6, 2014)
19. “Captain Phillips”: 19.817 million (Sony/Columbia, Oct. 11, 2013)
20. “Lone Survivor”: 19.130 million (Universal, Dec. 25, 2013)

* Combines data for both 1987 and 2014 versions.

Take note that “The Expendables 3” does not appear on the list despite a massive pre-release piracy that occurred this summer. (See here and here for more information.) This list shows the size and scope of the problem with pirated movies, which is just a fraction of all pirated content, including music and other content.

More tools, such as WheretoWatch.com and Rightscorp, continue to emerge in efforts to diminish piracy and protect intellectual property rights. But everyone needs to do more because the protection of intellectual property is essential for encouraging more innovation, creative content, and economic growth.

Sony Is the Latest Victim of Online Piracy

Last week, Sony Pictures Entertainment’s email system and other internal systems were hacked by a group called “Guardian of Peace.” This week, five of the studio’s movies were leaked online, including “Fury” and “Annie.” Oddly enough, the two incidents may not be related because it is being reported that the movies, which have been uploaded to many “torrent” websites, were ripped from DVDs.

Online piracy is a serious problem with serious consequences. Two men were recently arrested in London for the their role in leaking the movie “The Expendables 3,” which had over 2.2 million views before it even hit theaters this past summer. The theft of these five Sony movies likely could cost the studio hundreds of millions of dollars before it is over, especially considering that four of the five movies have not been released in theaters yet.

Online piracy is very detrimental to encouraging creative content, so it is important that various groups work together to quickly reduce it. The Motion Picture Association of America recently released a new website, WheretoWatch.com, which helps consumers quickly locate legal content online, in stores, or at the movies theaters. Rightscorp is another good tool that notifies Internet Service Providers, content companies, and consumers when content is pirated online.

Although this recent Sony incident is a step in the wrong direction, hopefully more tools that help secure strong intellectual property rights, like WheretoWatch.com and Rightscorp, will continue to emerge. The protection of intellectual property is essential for encouraging more innovation, creative content, and economic growth.