There's little sign that the global copyright war will let up any time soon. Wherever you go, the content industries are working hard to secure stronger "protections" for intellectual property and tougher penalties against those who infringe against these protections. Given the forces they can bring to bear - an army of lobbyists and an ocean of cash - it's not surprising that industry has won many of these battles.

Australia is one front in this war, and several notable skirmishes have occurred in recent times. The most significant has been a case in which the movie studios, represented by AFACT (the "Australian Federation Against Copyright Theft") sued Australia's third-largest ISP, iiNet, for authorising copyright infringement by allowing its users to download movies using BitTorrent.

Under Australian copyright law, a third party can be held accountable for a breach of copyright if they are found to have authorised the breach by "countenancing" it and providing the means to do so. This was tested in the courts in 1975 when a university was found liable for breaches of copyright because it provided a photocopier which students could use to make copies of books.

Bringing this suit against iiNet was a clear attempt to make ISPs liable for the content traversing their networks and is a probable first step on the road to introducing a graduated response mechanism to Australia. The ultimate outcome of the case will have enormous repercussions for the future of the industry and copyright law in Australia.

(more...)

The Australian Federation Against Copyright Theft (AFACT) yesterday released a report entitled "Economic consequences of movie piracy", which purports to show that illegal downloading is costing the Australian economy $1.37 billion every year. That is an alarming sum - or rather it would be, if we could take it at face value. The copyright industry is well known for offering up gargantuan figures that don't hold up under real scrutiny.

We encourage a skeptical reading of this report, and in particular, we note:

1. The assumption that 45% of downloads equal lost sales is unproven and insufficient evidence is provided to support it. The survey method cited is better than assuming 100% of downloads are lost sales, but there is better analysis in other studies - for example this piece by Lawrence Lessig. If the study was correct, sales of DVDs and attendance at cinemas would be much more reduced than the reported industry figures. In fact, the movie industry is making record profits.

2. It can't be ignored that downloads have an advertising effect both on the product downloaded and future releases. To the extent sales may be lost, these must be offset against other gains from advertising.

3. Gross revenue is not the relevant metric, due to variables such as investment in capital, distribution and costs of sales. Many of the movies downloaded may not have been available to view or buy in Australia. Profit is the metric of importance, but this is never studied.

4. Flow-on effects to other industries are wholly speculative, and lost tax on profits assumes the entities pay Australian company tax on sales pro-rata to revenue, which is not intuitive or evidenced. It also assumes that money not spent on movies is lost to the economy, instead of helping to create jobs in other sectors.

5. Peer to peer file sharing is merely the latest in a sequence of technologies since the 19th century which have been claimed to be the ruin of the creative arts. See chapter 15 "Piracy" by Adrian Johns (University of Chicago Press 2009) - the copyright owners said the same thing about copies of sheet music, tape recorders, every iteration of personal recording system and indeed public radio. However, "home piracy" acts not only as a loss to industry but also as a boon to distribution, bypassing censorship and limitations on sales by official outlets.

6. The report suffers, as have other industry-funded studies, from "GIGO". With an assumption that "downloads = losses" unproven, all conclusions estimating the size of the loss are equally unproven. What if a vibrant sharing culture increases total sales for media respected as quality by consumers, but reduces sales of hyped media? (Research has shown that the biggest downloaders in fact spend more on entertainment than non-downloaders.)

7. The call-to-action of this report is obviously to "crack down on piracy", shifting the cost of file-sharing from the industry to the taxpayer via increased law-enforcement. No industry, let alone the foreign-dominated entertainment industry, deserves a free ride for its business model. If instead, the industry noted that the report says 55% of downloads created a market for sales, much of which is unsatisfied due to current restrictive trade practices, then its future profitability would be in its own hands.

8. Repeated studies have demonstrated that the entertainment industry vies for money and commitment of time with all other forms of entertainment. The Internet, computer games and mobile telecommunication applications take "eyeballs and dollars" away from DVD and CD sales, but also sports arenas, sales of board games and printed works. Magazines are also suffering from a reduced value proposition with the Internet, and some forms of entertainment and some businesses in the industry will no doubt find it difficult to remain vibrant. Change is consumer-driven, and it's futile for the industry to try to hold fast to a business model and methods of content distribution which are dying with or without fierce law enforcement of copyrights.

We presume that the release of this report is a precursor to a renewed campaign for tougher penalties against file-sharing in Australia, such as a mandatory "three strikes" scheme to remove families from the internet completely. If so, Electronic Frontiers Australia will fight for the rights of Australian Internet users threatened by such a legislative over-reaction.

We urge the movie industry to cease waging war on its best customers, and instead focus on providing a more compelling offering to the public. The best way to ensure future profitability is to make quality entertainment available in an easy-to-use form, free from cumbersome rights-restricting controls, and at a reasonable price.

Michael Geist is reporting that the text of the secret Anti-Counterfeiting Trade Agreement (ACTA) chapter on internet enforcement has been leaked. As suspected, the text is unlikely to require major changes to Australian law, but it does do two very concerning things:

• Increased pressure on intermediaries (ISPs) to monitor and police their networks: in the recent iiNet litigation, the Federal Court found that ISPs were under no obligation to terminate the accounts of subscribers that the film industry alleged (without proof) were infringing copyright. This is a contentious point, and we expect to see the copyright industry lobby for legislative change. The ACTA provides them with more ammunition to argue for a three-strikes policy, which is unfortunate.
• Increased entrenchment of the harshest level of copyright sanctions: my biggest concern with ACTA is what it means for the way that international copyright law is developed. Copyright is such an important part of the framework that governs the way that we interact online - it underpins nearly every aspect of modern communication. Because the balance between providing authors with an incentive to create and users with the ability to access is so critically important, the way in which copyright policy is made is also critically important for a society. The ACTA, a secret plurilateral agreement, ensures that the role of the public is minimised, allowing corporate rightsholders to set the agenda for copyright policy.

(more...)

The new round of Anti-Counterfeiting Trade Agreement (ACTA) negotiations has started in Seoul. This round sees the introduction of the long-anticipated internet enforcement measures, which the US has drafted in secret. Michael Geist reports that the draft text is modeled on the US - South Korea free trade agreement, and focuses on five issues:

1. Baseline obligations inspired by Article 41 of the TRIPs which focuses on the enforcement of intellectual property.
2. A requirement to establish third-party liability for copyright infringement.
3. Restrictions on limitations to 3rd party liability (ie. limited safe harbour rules for ISPs). For example, in order for ISPs to qualify for a safe harbour, they would be required [to] establish policies to deter unauthorized storage and transmission of IP infringing content. Provisions are modeled under the U.S.-Korea Free Trade Agreement, namely Article 18.10.30. They include policies to terminate subscribers in appropriate circumstances. Notice-and-takedown, which is not currently the law in Canada nor a requirement under WIPO, would also be an ACTA requirement.
4. Anti-circumvention legislation that establishes a WIPO+ model by adopting both the WIPO Internet Treaties and the language currently found in U.S. free trade agreements that go beyond the WIPO treaty requirements. For example, the U.S.-South Korea free trade agreement specifies the permitted exceptions to anti-circumvention rules. These follow the DMCA model (reverse engineering, computer testing, privacy, etc.) and do not include a fair use/fair dealing exception. Moreover, the free trade agreement clauses also include a requirement to ban the distribution of circumvention devices. The current draft does not include any obligation to ensure interoperability of DRM.
5. Rights Management provisions, also modeled on U.S. free trade treaty language.

(more...)

This week I was interviewed by Phil Dobbie for ZDNet's Twisted Wire program. Also interviewed were Peter Coroneos from the Internet Industry Association and Adrianne Pecotic from AFACT. You can listen to the podcast (direct link (mp3)).

One thing I found disturbing about this interview was AFACT's suggestion that the law was clear and that iiNet had a clear responsibility to monitor its subscribers' internet use and disconnect users who infringe. This is obviously a contested issue, and the law certainly is not clear. The particular requirement of the Safe Harbours are largely untested - both here and in the US - and particularly against ISPs. We have mostly assumed that ISPs were more like common carriers than the P2P networks that have been found responsible for secondary copyright infringement. The iiNet case challenges that assumption, but it is misleading to argue that the law is clear in any meaningful way.