The USTR Notorious Markets Report: Does it Provide Free Advertising for Pirates?

The USTR Notorious Markets Report: Does it Provide Free Advertising for Pirates?

It’s that time of year again[i] when the Office of the US Trade Representative (USTR) seeks public comment and input to its annual “Notorious Markets” exercise, a supplement to the annual USTR Special 301 report on the intellectual property practices of other nations. The Federal Register notice indicates that USTR;

“requests comments that identify online and physical markets to be considered for inclusion in the 2020 Review of Notorious Markets for Counterfeiting and Piracy (Notorious Markets List). The Notorious Markets List identifies examples of online and physical markets that reportedly engage in and facilitate substantial copyright piracy or trademark counterfeiting. The issue focus for the 2020 Notorious Markets List will examine the use of e-commerce platforms and other third-party intermediaries to facilitate the importation of counterfeit and pirated goods into the United States.”

The bulk of the comments provided come from industry which does the research and draws to the attention of USTR the websites, e-commerce platforms and physical markets that engage in the widespread sale of–or which facilitate the distribution of—infringing and counterfeit products. A good example is the submission from the Motion Picture Association that extensively documents the illicit activities of a number of linking and streaming websites, direct download cyberlockers, streaming video hosting services, illegal IPTV services, piracy devices and apps, peer-to-peer networks and BitTorrent portals, hosting providers, certain domain registries, and some payment providers, ad networks and online advertising services. In total, over 50 entities are named, yet the submission notes that this is not a comprehensive list, merely illustrative. Among the names are creative monikers (that clearly reveal their marketing intent) such as Mr. Piracy, Gimyvod, Everstream, Topflix, Unblock Tech and a host of other less descriptive “businesses” living in the shadowy corners of the internet.

Physical markets are also named (none in the US), with the one closest to “home” being the Pacific Mall in Toronto, (although it was dropped by USTR in last year’s report). Pacific Mall also made it onto the EU’s similar Counterfeit and Piracy Watch List in 2018. I visited the Mall a couple of years ago (see my account here) and found it more of a flea market than a hotbed of pirated and counterfeit goods, so perhaps the persistent efforts to put it in the spotlight have had some positive results.

USTR is quick to note that its Notorious Markets report, “is not an exhaustive account of all physical and online markets worldwide in which IP infringement may take place,” and it “does not make findings of legal violations nor does it reflect the U.S. Government’s analysis of the general IP protection and enforcement climate in the countries connected with the listed markets”. Yet inclusion on the list is no small matter. Last year Amazon was listed, but indirectly by naming Amazon’s websites in several countries outside the US (UK, Canada, France, Germany, India). It’s not that platforms, sites or markets distributing or facilitating the sale of pirated or counterfeit goods don’t exist inside the United States; it’s just that it’s not USTR’s practice to report on them.

Despite this, in the MPA submission there is indirect mention of several US-based entities such as Cloudflare, eBay, and Facebook Marketplace. Cloudflare has long been a problem, as I wrote about last year (here), allowing its technology to be used to shield from scrutiny pirate sites and other websites engaging in illegal activity. Its technology provides a reverse proxy functionality to hide the real IP address of a webserver. Unfortunately, Cloudflare is not too fussy about who its customers are. However, despite referencing Cloudflare and others, MPA did not specifically list any US companies for inclusion on the list. But the EU had no such hesitation, listing Cloudflare and noting in its Watch List report that the service is used by approximately forty percent of the pirate websites in the world to hide their true identity.

When it comes to compiling the list, most of the research and heavy lifting is done by US trade associations and others who file submissions identifying problem markets or services. Besides the film industry, other sectoral trade associations that usually “comment” to USTR represent the music industry, video and electronic games, publishing, footwear and apparel, technology, computer software and some others. As comments are posted, rebuttals and clarifications are sometimes also submitted during the process by entities protesting their potential inclusion, although the most egregious dedicated pirate and counterfeit sites do not bother, precisely because they have decided to ignore US law and trade actions.

Not all the submissions are from industry or those targeted, however. This year, the online journal TorrentFreak highlighted an interesting submission from a Las Vegas based legal practitioner and self-described “concerned taxpayer”, Jim Zhou. According to Zhou, the Notorious Markets List has just the opposite effect from that intended. Rather, it operates as a facilitator of the traffic that it seeks to prevent. He argues that;

“By giving it an official seal of notoriety, the presence of this regulation effectively becomes advertising and an unwitting endorser of the services or product.”

It’s almost as if a pirate website or illicit merchant could advertise “Selected for the US Government’s Notorious Markets List for the Fifth Year Running!” If consumers of pirated content or counterfeit goods want to find out where to find the best range of product, according to Zhou they need look no further than USTR’s annual report. It becomes a sort of Consumer Reports for those researching the “best” pirate and counterfeit products. He argues that not only will consumers of illicit products use the report to find what they seek, but statistics on the numbers of users per illicit site reported by USTR is useful information for advertisers seeking to reach consumers of these products, and for the sites themselves to market themselves to advertisers. The list is given wide media coverage every year.

It’s an interesting argument, albeit one that deserves to be approached with a healthy degree of skepticism. Is there any proof that an illicit site’s business surges once it has been elevated to USTR’s hit parade? None that I know of. In fact, there is a chicken-and-egg element to this because a site or service would not be on the list if was not already “successful” to some degree, having attracted the attention of legitimate providers of services, products and content that want to put it out of business.

I reached out and contacted Zhou to ask him how he had reached his conclusions. He conceded that he did not have any statistics but said that knowing how opaque markets work in other areas, he didn’t see why pirate and counterfeit markets would be any different. As an example from another sector, he cited the DARE (Drug Abuse Resistance Education) programs. DARE, whose aim is to prevent youth from succumbing to drug addiction through drug education programs delivered through schools, has been criticized in the past for ineffectiveness or inconclusive outcomes. (It has since revised its curriculum.) In Zhou’s view, DARE programs in the 1990s had the perverse effect of introducing kids to drugs rather than keeping them away from using. The marketplace for pirated and counterfeit goods is no different from any other underground marketplace, he stated, where reputation for having the “good stuff” is all-important. It certainly gives one pause for thought.

Anecdotally, I can testify from personal experience in China a few years back about a similar phenomenon. The more that American and European companies complained to their governments about the infamous “Silk Market” in Beijing, and the more those governments leaned on the Chinese authorities to take action to close it down (with resultant publicity), the more popular it became. I have seen tourist brochures featuring the Silk Market (which may have sold a bit of silk, but was mostly a market for cheap knock-offs and, at the time, products like pirated DVD movies) as one of Beijing’s major attractions, on a par with the Temple of Heaven and the Forbidden City! (By the way, Beijing’s Silk Market remains on the USTR Notorious Markets list).

So perhaps Mr. Zhou has a point. That said, the Notorious Markets report has gained considerable negative prominence in recent years, and a number of companies go to considerable lengths to stay off it. This suggests it has some efficacy as an anti-piracy and counterfeiting tool. Being on the list doesn’t result in any direct legal action against a particular listing, nor is that the intended result, but it can lead to pressure being brought against named entities by the governments of the countries in which they are based. Moreover, it is hard to believe that the “free advertising” provided by USTR is of much use since the more popular a pirate site or service becomes, the more it is likely to be subject to sanctions and pressure to close down or change its identity. In the end, the result of getting free advertising from USTR may not be more business—but being put out of business.

© Hugh Stephens, 2020. All Rights Reserved.

[i] November 8, 2020 was the deadline for submission of comments and November 22, for rebuttals and other information.

Author: hughstephensblog

I am a former Canadian foreign service officer and a retired executive with Time Warner. In both capacities I worked for many years in Asia. I have been writing this copyright blog since 2016, and recently published a book "In Defence of Copyright" to raise awareness of the importance of good copyright protection in Canada and globally. It is written from and for the layman's perspective (not a legal text or scholarly work), illustrated with some of the unusual copyright stories drawn from the blog. Available on Amazon and local book stores.

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