Tag: watch list

Canada (Finally) Does Something Right on Copyright Protection: According to US Study, Canada’s Site Blocking Process is Worth Emulating

Report Cover: Used with Permission of DCA

It is a foggy Friday when a report out of the US heaps praise on Canada for anything in the area of intellectual property. But surprise, it just happened! Canadians are more used to being chastised (often with good reason, I hasten to add) by US industry groups such as the International Intellectual Property Alliance (IIPA), or in the annual “Special 301” report issued by the Office of the US Trade Representative (USTR) which is compiled from complaints brought forward from various US industry groups. This year’s Section 301 report once again placed Canada on USTR’s “Watch List”. According to USTR, the Watch List is used to designate US trading partners that “merit bilateral attention to address underlying IP problems“. A perennial favourite on the Watch List, this year Canada joins 19 other countries including such IP powerhouses as Turkmenistan, Algeria, Belarus and Bulgaria (the only EU member state on the list). Is this an objective assessment? Maybe, maybe not.

It’s not that the US itself is purer than the driven snow (the snow no doubt being part of the “cold air from Canada” that features regularly on US weather reports) when it comes to IP protection. It’s just that USTR does not report on the US’s own transgressions, as it has no mandate to do so. I gave it a helping hand a few months ago when I filed my own Watch List recommendation, (The USTR Watch List Designation You Will Never See), which “playfully” (as one of my readers commented), put the US on the list for a range of copyright lapses. Among the most serious was a complete absence of any workable mechanism to block or disable offshore pirate content websites. I pointed out that the US is the largest market for pirated content globally, with 13.5 billion visits to pirate sites annually according to Variety, yet is one of the few not to have a system to disable distribution of pirated content from offshore, often known by the shorthand term “site blocking”.

I personally don’t like the term “site blocking” as it implies some form of government censorship. It should more accurately be called “disabling access to offshore pirate websites” but that is too much of a mouthful, so we will have to go with the shorthand version. Site blocking, which is practiced in more than 50 countries, including Canada, (but not the US) is normally instituted after a judicial or administrative process, requiring substantial justification, whereby content owners seek remedies against offshore websites (which are located in jurisdictions beyond the reach of domestic law) that distribute pirated content and undermine licensed distribution. The remedies normally involve injunctions requiring domestic internet providers to block identified pirate sites. It was pioneered by the UK and Australia, where it has been overwhelmingly successful in curtailing distribution of pirated content and encouraging uptake of legitimate, licensed alternatives.

In Canada, application for a blocking order is made to the Federal Court by content owners (such as Rogers or Bell Media), often to cover streaming of high-profile sports games. Owners of the sites to be blocked can appear and argue against the order, but being offshore pirate sites, none do. Once issued, ISPs (internet service providers), who are the actual targets of the orders, are obliged to disable/block the pirated content stream so that viewers cannot receive it. Originally some ISPs, notably TekSavvy, opposed the orders although the major ISPs, some of which are owned by the owners or licensees of the sports content, went along without a fuss. TekSavvy’s objections were dismissed, as I wrote about here (Appeal Against Canada’s First Successful Pirate Site-Blocking Order is Dismissed: Good News for Copyright Protection in Canada), and the process has become more or less routine.

Recently the regime in Canada has been strengthened by the granting of dynamic injunctions. Dynamic injunctions allow flexibility, targeting the content rather than a specific Internet address, thus allowing the blocking order to shift to whatever address the pirated feed is coming from. It is a common tactic of pirate sites to shift IP address regularly as one means of evading the court authorized blocking order. Dynamic injunctions help to counter this tactic.

If site blocking is such an essential tool in the anti-piracy toolbox, then why doesn’t it exist in the US, a country with a huge economic stake in the production and distribution of legitimate content, and unfortunately a market where piracy is as common or more common than in many other countries? US stakeholders tried, unsuccessfully, to secure passage of site blocking legislation more than a decade ago, with the introduction of the Stop Online Piracy Act (SOPA) into Congress in 2011. While widely supported by content industries and many members of Congress, it became the target of attack by cyber-libertarians stoked up by Silicon Valley. In an attention catching gimmick, Wikipedia and Reddit blacked out for a day, January 18, 2012, in protest. The legislation went into the “too difficult” basket and has never been revived.

The specious argument was put forward that SOPA would “break the internet” and interfere with the free flow of information. That was ridiculous then, and it is ridiculous now, as the successful establishment of site blocking in over 50 countries globally, including well established democracies such as the UK, France, Spain, Germany, Netherlands, the Nordic countries, India, Australia—and Canada—clearly shows. That point, along with data demonstrating the proven efficacy of site blocking, is among the key themes of a new study just published in the US by the Digital Citizens Alliance (DCA), commissioned from research firm IP House.

The DCA is a “consumer-focused group whose mission is to raise awareness among the public and policymakers about how to make the Internet safer”. Its latest report, “Overseas and Out of Reach: International Video Piracy and US Options to Combat It”, not only debunks the “break the internet” nonsense, but goes on to discuss the economic damage caused by pirate operations to legitimate business and government revenues. It also puts the spotlight on how piracy feeds revenue to organized crime, outlines the risk to consumers of clandestine installation of malware, explains how site blocking works, and documents the effectiveness of site blocking (as one essential tool among others) in combatting video streaming and Video-on-Demand piracy services. The unspoken bottom line message is that Congress should start looking seriously at reviving site blocking legislation.

To quote from the report’s introduction;

“The United States faces a problem. Overseas criminals targeting Americans often live in countries that won’t prosecute them or lack adequate legal tools to do so – leaving them beyond the reach of U.S. law enforcement and secure in the notion they won’t face any consequences for their illegal activity.  One example: Overseas operators of illegal piracy websites and apps make $2.3 billion a year – while also using that stolen content to bait Internet users so they can infect devices with malware or steal credit card information.

One solution adopted by Canada, the United Kingdom, and Australia and over 50 other countries: if they can’t reach the overseas criminals targeting their citizens to deter them, then they block the websites of those criminals so they can’t reach their citizens.”

So there you have it. Canada is cited as an exemplar in this regard. What a refreshing change. Let’s hope the study gets the attention it deserves in the US and in Congress because combatting piracy is something that is in everyone’s interest, from law enforcement to film and TV production to consumers.

Let’s be clear. Damage to US film and TV production hurts Canada, given the almost $8 billion that was invested in such production in Canada in 2023 by foreign, mostly US, producers. While the majority of it was foreign location and service (FLS) filming, it also included $1 billion in financing for Canadian owned content production. Canada may have managed to establish a workable site-blocking regime, using the courts, but there is still much more that needs to be done in Canada and elsewhere to combat the threat of online content piracy. The Overseas and Out of Reach study is a valuable contribution to this debate.

© Hugh Stephens, 2024. All Rights Reserved.

The USTR “Watch List” Designation You Will Never See

Image: Shutterstock (AI Assisted)

In my last blog post, I discussed the annual Special 301 Report issued by the Office of the US Trade Representative (USTR). The Report is a global survey of the intellectual property (IP) practices of a number of US trading partners, a kind of “report card” in which those that “fail” (badly) are named to a Priority Watch List (PWL) and those that fail, but not so badly (and so are encouraged to do better), are put on the Watch List (WL). The purpose is to highlight practices that damage the interests of American IP-based businesses and IP stakeholders in order, eventually, to get them changed. While one can quibble with some of the IP “transgressions” identified by USTR in its wide-ranging survey, removing or modifying the IP impediments identified in the Report generally speaking results in better outcomes for innovation and creativity both for US IP interests and foreign rightsholders, at least in the area of copyright. (The practices, laws and policies named in the Report are not restricted to copyright; they cover the full range of IP issues such as patents, trade secrets, industrial designs, geographic indications and trademark infringements/counterfeiting). I am going to restrict my commentary today solely to copyright issues.

Since the Report is a US government document mandated by US legislation, and deals with US foreign trade, it is not surprising that problematic IP issues inside the United States are not included in the document. Thus, US rightsholders are deprived of the salutary effect that arises from shining a spotlight on such practices. Were the USTR to hold up a mirror to the US and apply the same sort of critical analysis it applies to other countries, what would be the result? We will never know as USTR has no mandate to publish such a document; the closest it came to criticizing a US company was its inclusion of Amazon’s non-US affiliates in its 2020 “Notorious Markets” list which forms part of the Special 301 Report. Since USTR will never publish a Watch List that includes the United States, someone needs to step into the breach, hold up that mirror and attempt to write what a US Watch List designation might look like. That someone will be me. However, as noted, the commentary will be based exclusively on copyright issues; I am not going to tread into the minefield of patent trolls, counterfeit products, trade secrets or any of the other aspects of IP that are also grist to USTR’s mill.

In assessing what a US Watch List citation might look like, I will follow the same general approach that USTR applies when it passes judgement on the copyright practices of other countries. A measure doesn’t have to discriminate against US IP interests or rightsholders to be included in the Special 301 Report (i.e. it doesn’t matter if US rightsholders are granted national treatment; USTR can still object to the practice), so I will apply that principle. In judging whether to include criticism of certain US measures, or lack of them, I will be guided by the sort of issues that USTR identifies in the practices of other countries named to the PWL or WL. Since I know a bit about copyright in Canada, and since Canada is again on this year’s WL as it has been for the past couple of decades (except when it was downgraded to the PWL), I will use Canada as my principal marker.

For example, in this year’s Special 301 Report in which Canada once again features on the Watch List, the USTR Report critically notes that “Levels of online piracy remain very high in Canada, including through direct downloads and streaming”. In actual fact, Canada is a relatively minor league player when it comes to online piracy. According to the brand protection website Bytescare, Canada doesn’t even rank in the top 20. The list is dominated by Russia, China, India, Brazil etc, and the United States. In fact, according to Variety, the US is the leading source of online piracy globally with 13.5 billion visits to piracy sites annually. Aha, you say, but what about the rate of piracy? Canada’s population is only 40 million so no wonder it is not as high on the list as some others in terms of total piracy visits. According to the Canadian Internet Registration Authority, as quoted by Global News, Canada’s piracy rate in 2022 was a shocking 22.5 %. The US rate in the same year? As estimated by media research firm Parks Associates, it was 22% is but expected to rise to 24.5 percent by 2027. So I guess the US should be called out for its high levels of online piracy. After all, what is sauce for the goose is sauce for the gander.

I will draw on another example from this year’s USTR Report to justify inclusion of a separate observation in my assessment, regarding music royalties. This year, Barbados is singled out for, among other things, “the refusal of Barbadian television and radio broadcasters and cable and satellite operators to pay for public performance of music.” But guess what? Neither does the US, in certain circumstances. As I outlined in this blog (“The American Music Fairness Act (AMFA): A Better and Fairer Solution for Performers than Seeking “National Treatment”), US terrestrial radio stations are not required to pay royalties to performers or labels for playing recorded music on air, a longstanding practice that dates back to the early days of radio. The same free ride does not apply to digital broadcasters and streaming services. Terrestrial AM/FM radio stations are required to pay royalties to composers and songwriters for music played on air, but not to performers. The US is the only developed country jurisdiction to provide such an advantage to terrestrial broadcasters, although since 1997 Canada has had a carve out whereby commercial radio broadcasters are required to pay only $100 in performance royalties on the first $1.25 million in advertising revenue. Needless to say, this is opposed by Canadian performing rights organizations.

The US AM/FM exception denies royalties to US performers for music played on US terrestrial radio, but it also applies to foreign performers when their music is similarly played in the US. For this reason, many countries, including Canada, apply or applied a reciprocity provision (an exception to national treatment) to payment of royalties to US performers when their music is played terrestrially. Unable to get the US Congress to change US law, US performing rights organizations convinced the US government to seek national treatment in Canada with respect to all categories of IP covered in the IP chapter of the USMCA/CUSMA, a goal that was achieved when the new Agreement was signed. Thus, US performers in Canada now get equivalent treatment to Canadian performers; in other words, they get better IP protection in Canada than they do (or Canadian performers do) in the US. Yet Canada is on the USTR Watch List. Sauce for the goose…

That is some of the background to my decision to put the United States on the Watch List in 2024 for copyright-related issues. There are other reasons as well. I know you want to read the full reasoning, so here goes;

The United States remains on the Watch List for 2024. Despite a strong legal framework in place, the US continues to be the source of the largest number of visits to online pirate sites globally. Unfortunately, unlike some 40 countries globally, including USMCA partner Canada, the US has been unsuccessful in implementing any form of site blocking legislation. Site blocking has proven to be an effective and low cost tool, in combination with other measures, to reduce visits to pirate websites and to convert users to legitimate sources of online content. The US authorities are encouraged to work with Congress to put in place an effective mechanism to implement site-blocking in order to reduce high rates of piracy estimated to be in the vicinity of 25% of users. We also have continuing concerns about the inadequacy of US law in protecting performance rights for music played on terrestrial radio stations. The United States is the only developed country that provides an exception for payment of performance royalties for terrestrial stations, a situation that has led to the denial of performance royalty payments to US musicians and labels on the basis of reciprocity in a number of countries where it has not been possible to obtain a national treatment commitment to protect US performers. We remain deeply concerned by stakeholder reports that a 2020 Supreme Court ruling in the US (Allen v Cooper), that upheld the ability of US states to impair the rights of copyright holders based on the principle of sovereign immunity, remains unaddressed. This interpretation opens the door to widespread “legalized infringement” by state operated institutions, such as state university libraries. With regard to fair use, we are encouraged by recent court rulings that suggest a more narrowly defined interpretation of “transformative use” is being applied by US courts in adjudicating fair use claims. We are also encouraged by the passage of legislation to increase criminal penalties for illegal streaming (the Protect Lawful Streaming Act) but note that the legislation has been rarely used since it came into effect in 2020 and urge the US Department of Justice to take full advantage of the tools at its disposal to curb the high rate of online piracy and illegal streaming in the United States. We look forward to working with the United States to resolve these and other important issues.

So there you have it, a slightly cheeky (and tongue-in-cheek) Watch List designation for the US, aka “The Watch List Designation You Will Never See”. I hope this doesn’t upset my many Stateside friends. It is offered in the spirit of “no one is perfect”. All we can do is strive for perfection through learning from each other.

© Hugh Stephens, 2024. All Rights Reserved.