As most legal systems have adopted a “don’t shoot the messenger” mindset when addressing Internet conduct, many entertainment industry and related groups believe that the “messenger,” in this case the Internet service provider (“ISP”), holds the key to controlling the conduct of infringers and cyber pirates. Several legal systems have adopted a “Three Strikes” rule that requires ISPs to cut off service to users after multiple warnings against infringement.
This is part one of a two-part article that examines the question of whether the Three Strikes system is effective in accomplishing its purpose, and is likely to spread as the preferred method of combating global piracy.
The Cyber Piracy Problem
In the early days of writing, copying was extremely difficult. Whether stone tablets, clay tablets or other devices were used, it was next to impossible to make a duplicate of another’s writing. If someone copied a work of art or re-wrote the Bible, it would often take months or years. In today’s world, a simple “right click, copy, right click, paste” can create an infringing work in a fraction of time. A drag of a cursor and a dropped file can create a duplicate recording with relative ease. Since most of this copying is done in private, without others watching the theft, cyber piracy has flourished without the stain of being labeled a criminal. If one were to walk into a book store, grab a book, put it under a sweater and walk out of the store without paying, that person would be looked at with disdain as a shoplifter. However, the same person who downloads a copy of that book without paying for it is not noticed and, if exposed, might not be held to the same ridicule as the shoplifter. The online theft that occurs in today’s environment has created levels of theft unrivaled in the past.
A study by Envisional, commissioned by NBC Universal, for the analysis of “bandwidth usage across the Internet with the specific aim of assessing how much of that usage infringed upon copyright” revealed that 23.76 percent of traffic on the global Internet (exclusive of pornography) was estimated to be infringing, while 17.53 percent of U.S. Internet traffic (exclusive of pornography) was estimated to be infringing.1 Peer-to-peer networks, where infringing content often is transferred, account for a substantial portion of this traffic.
In 2007, the Institute for Policy Innovation (“IPI”) released “The True Cost of Sound Recording Piracy to the U.S. Economy”2 with startling figures. The study found that “as a consequence of global and U.S.-based piracy of sound recordings, the U.S. economy loses $12.5 billion in total output annually.”3 The study determined that as a result of sound recording piracy, the U.S. economy loses 71,060 jobs, with U.S. workers losing $2.7 billion in earnings, and federal, state and local governments losing a minimum of $422 million in tax revenues.4 The Recording Industry Association of America (“RIAA”), a trade organization that promotes the “financial vitality of the major music companies,” recognized this impact and categorized “piracy” as “too benign of a term to adequately describe the toll that music theft takes on the enormous cast of industry players working behind the scenes to bring music” to the public.5
The Three Strikes, or Graduated Response, System
In 2008, the RIAA, among other large entertainment industry groups, made a decided shift in its strategy for battling digital copyright infringement.6 The RIAA moved away from suing individuals for file sharing and cyber piracy after realizing such suits failed to discourage individuals from participating in such practices, and launched a campaign to engage ISPs to deliver the ultimate punishment to suspected infringers.7 This new strategy became widely known as the Three Strikes, or graduated response, system for dealing with Internet piracy, and has since been enacted into law in a limited number of European and Asian countries.8
Essentially, with some variations discussed below, the Three Strikes system involves a copyright holder notifying an ISP that his or her intellectual property is being infringed. Thereafter, the ISP, either mandated by law or voluntarily, sends out a notice of the allegation to the Internet subscriber implicated in the alleged infringement. After three such notices, if the subscriber does not remove the infringing content or cease the infringing activity, the subscriber’s Internet connection is temporarily terminated.
All countries that have implemented graduated response-type legislation permit the suspension or termination of Internet access only after the accused subscriber has been notified that his or her connection is being used for infringing activity and further cautioned of the repercussions of such continued activity (i.e., termination of Internet access).9 A recent report by the World Intellectual Property Organization (“WIPO”) noted an inherent problem with these notices: “At present, there do not appear to be any infringement notice models that require an infringement notice to be sent only to an infringing Internet user.”10 Although some of the graduated response models provide vehicles to dispute the allegations of infringement, the lack of a mandate to direct the notices only to actual infringers demonstrates concerns over due process voiced by the critics of this system. The same WIPO report further noted that it would be impossible to reliably identify the actual infringer, and moreover, “such a policy may discourage business models that allow anonymous access to the Internet (a feature that can be indispensable for the exercise of freedom of expression).”
South Korea Enacts First Three Strikes Law
South Korea was the first country to push through one of the most punitive Three Strikes laws. The Committee on Culture, Sports, Tourism, Broadcasting & Communications of South Korea’s National Assembly passed a bill to amend South Korea’s Copyright Act in order to implement a Three Strikes system, taking effect in July 2009.11 The new law permitted the Minister of Culture, Sports and Tourism (“MCST”) to order online service providers (“OSP”s) to suspend for up to six months accounts of infringers who had received three or more warnings.12
In addition to the authority provided to the MCST in this regard, amendments to the Copyright Act further authorized the Korea Copyright Commission (“KCC”) to recommend to OSPs that they send warnings and/or suspend accounts of infringers.13 Although the KCC is only authorized to “recommend” such measures to an OSP, the OSP most often takes such recommendations as mandates, since the law offers KCC the option of turning to the MCST to issue an order in cases of noncompliance.
On November 3, 2010, the Motion Picture Association International announced that the world’s first graduated response sanctions were imposed in South Korea, with the MCST ordering the suspension of 11 online accounts of “known copyright infringers.”14 Within the first year of enforcement, the KCC had sent out 32,878 warnings, and there had been 32,209 cases of deletion or blocking of content, and 31 total cases of suspension of user accounts.15
The French Three Strikes Law
Although France lagged behind South Korea by a few months in passing a graduated response law, it nevertheless received the most publicity. With the passage of its Loi favorisant la diffusion et la protection de la création sur Internet in 2009, a new government authority was established to administer the provisions of the law, the Haute Autorité pour la Diffusion des Œuvres et la Protection des Droits sur Internet (HADOPI).16
Initially, the Constitutional Council of France determined that allowing a non-judicial governmental body (i.e., HADOPI) to impose sanctions was unconstitutional, violating the articles of the 1789 Declaration of the Rights of Man and of the Citizen that guarantee citizens the presumption of innocence and the right to freedom of expression and communication.17 The bill was amended before passage so that termination of Internet access could only be ordered by a judge.18
Under the HADOPI law, infringement e-mail notices are issued by the HADOPI authority once they receive (1) evidence of infringement and details of the Internet protocol (“IP”) addresses used for the infringement from the copyright holder and (2) the names of the Internet subscribers using the IP addresses at the relevant time from the ISP.19 After three such warnings, the alleged copyright infringers will be reported to a judge, who will then decide on the penalty, ranging from fines to termination of the accused’s Internet connection.20
Soon after the passage of the HADOPI law, the French anti-piracy investigative company, Trident Media Guard, was employed by the entertainment industry to track illegal file-sharing in France and report it to the HADOPI authority.21 The entertainment industry’s efforts resulted in HADOPI receiving 50,000 complaints per day within the first couple of months of its operation.
HADOPI’s office released an initial report on its efforts to curb piracy in July 2011.22 It reported that since October 2010, the IP addresses of 18 million file-sharers were reported to HADOPI by rights holders. Out of the 18 million reports, 470,000 first warning e-mails were distributed (the relatively low number having mostly to do with HADOPI’s limited capacity) followed by 20,000 second warnings and approximately 10 ultimate third warnings. These 10 cases were transferred to a judge for consideration.23
Although no one has yet been disconnected from the Internet under the HADOPI law, the story of one of the 10 that received the final warning is serving as a case-in-point for critics of the system. Robert Tollot, a 54-year-old high school teacher, has been accused of downloading music by Rihanna and the movie Iron Man II, despite his protests that he does not know how to do so.24 After receiving his second warning and making his second protest of there being some mistake, Tollot was directed by HADOPI to secure his network in order to prevent others from using the connection for pirating.25 Attempts failed, and Tollot ended up in the first class of individuals who may have penalties imposed upon them under France’s Three Strikes law (a fine of 1,500 euros and/or one month of Internet disconnection).26
Even if Tollot’s claim of hackers being the cause of the illegal downloads is true, he would still be penalized as an infringer because of a decree that imposes the same penalties for negligent behavior―specifically defined as “not having put in place security measures” or having lacked diligence in putting in place such measures―as those imposed on actual infringers.27
Taiwan also an Early Adopter
Taiwan introduced amendments to its Copyright Act in 2009, resulting in legislation that was a mix between the U.S.-style safe harbor for the ISPs and a Three Strikes regime for repeat alleged infringers. Under the amendment, the ISPs would be protected against liability if they informed “users that in the event of repeat alleged infringement up to three times, the service provider shall terminate the service in whole or in part.”28
Spread of the Three Strikes System?
— The United Kingdom
The United Kingdom’s attempt to pass something similar to a Three Strikes law has been suspended from the time of introduction in early June 2010. Sections 3 through 18 of the UK Digital Economy Act of 2010 were intended to be applied by direction from Ofcom, the independent regulator and competition authority for the UK communications industries, with parliamentary approval. The Act includes the following language on possible measures to remedy ongoing infringement: “. . . limiting the speed or other capacity of the service provided to a subscriber; preventing a subscriber from using the service to gain access to particular material, or limit such use; suspending the service provided to a subscriber; or limiting the service provided to a subscriber in another way.”29
However, the government made the following statement in February 2010, casting doubt on the government’s commitment to the graduated response approach: “We will not terminate the accounts of infringers―it is very hard to see how this could be deemed proportionate except in the most extreme―and therefore probably criminal―cases. We added account suspension to the list of possible technical measures which might be considered if our measures to tackle unlawful file-sharing through notifications and legal action are not as successful as we hope. This is but one of a number of possible options on which we would seek advice from Ofcom . . . . However what is clear is that we would need a rapid and robust route of appeal available to all consumers if we decided technical measures were needed.”30
Despite these statements, it appears that these provisions may still go into effect, but not before 2012 at the earliest. There is still work to be done. As reported by Wired magazine, the government must pass secondary legislation through Parliament to show how the proposal will be paid for and how it will work, and Ofcom will be required to set up an appeals process.31
— New Zealand
New Zealand’s Copyright (Infringing File Sharing) Amendment Act became effective September 1, 2011. The prohibited act of file sharing is defined as uploading or downloading copyrighted content without permission. The subscriber can challenge the notification(s) it receives by contacting the Internet protocol address provider (“IPAP”), which simply forwards the challenge to the rights holder for consideration, and the rights holder responds to the challenge via the IPAP.32
The first of these notices is a detection notice; the second, a warning notice; and finally, an enforcement notice. After the enforcement notice, the copyright holder can take his or her case to the Copyright Tribunal, which is authorized to administer penalties of up to $15,000. Claims for more than $15,000 must be pursued in the district court. However, the penalty of Internet suspension will require secondary legislation before going into effect. It is expected that the issue of suspension will be reviewed in 2013 in connection with a review of the digital copyright amendments, and may be brought into force if the notice process and the remedies by the Copyright Tribunal prove to be ineffective.33
— Germany
Although Germany indicated its opposition to the adoption of a Three Strikes system early on, it may now be warming up to the scheme. At the end of May 2011, Bernd Neumann, Germany’s culture minister, reportedly made comments in support of a graduated response-type scheme. “Speaking . . . to an audience of copyright industry lobbyists, Herr Neumann said that German copyright law should be extended to incorporate what he called a Warnhinweismodell (warnings and notification model). He also called for the ISPs to be made liable for copyright enforcement.”34
The Future of the Three Strikes System
In the second part of this article, we will discuss some alternative approaches to the Three Strikes system, criticism of the System, and the new trend of ISPs voluntarily implementing a Three Strikes-type system through agreements with entertainment industry giants. The article will discuss whether some form of the Three Strikes system has a future.
Adam R. Bialek is a partner in Wilson Elser’s New York offices. He is chair of the firm’s Intellectual Property practice and focuses his practice on intellectual property, Internet law, data security and privacy, commercial litigation, insurance law and small business general counsel work. Mr. Bialek counsels clients in intellectual property rights analysis, execution and transactions, including registration and licensing of copyrights and trademarks, preparation of software and development agreements, all aspects of Internet law and general brand building. His IP litigation experience includes copyright, trademark, trade dress, trade secret, patent infringement, data breaches, domain name disputes and complex international counterfeiting matters.
Amanpreet Kaur is an associate in Wilson Elser’s San Francisco office and a member of the firm’s Intellectual Property practice. She graduated from law school in 2010 with a specialization in intellectual property law. Prior to joining the firm, Ms. Kaur spent her final summer of law school at the International Trade Commission, working for an administrative law judge on patent, copyright and trade secret matters. She is also on the board of the South Asian Bar Association of Northern California Foundation, which provides fellowships to law students doing public interest work.
© 2011 Wilson Elser Moskowitz Edelman & Dicker LLP
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