This is a copy of an article published in The Lawyers Weekly (January 2010) by Barry Sookman and Dan Glover.
In mid-2009, the Canadian government launched a nationwide consultation meant to canvass what amendments to the Copyright Act are necessary to support Canada’s participation in the global, digital economy, and to foster innovation, creativity, competition and investment.
There is no doubt that our copyright laws need amending. Amendments are required on a number of fronts. New exceptions are required to meet legitimate user expectations to access and use copyright content without infringement. Amendments are also needed to reduce online piracy and to support making licensed services available to the public.
We propose to focus this article on one of the most needed and most poorly understood processes for reducing online infringement and promoting legitimate sources of online content. It is called “graduated response” or, as critics often derogatorily label it, “three strikes”.
A developing trend among other governments modernizing their copyright legislation is to bring Internet Service Providers (ISPs) and rights holders together in a “graduated response” system to help reduce illegal peer-to-peer (P2P) file sharing.
As the New Zealand government recognized in a December 2009 cabinet paper, illegal P2P file sharing places real strains on conventional copyright law. Many leading P2P technologies break down files into extremely small pieces that are shared dynamically across a network by hundreds or thousands of users. There is no website that “hosts” the file itself, making it difficult for rights holders to get an infringing file to be taken down off the Internet.
Graduated response, which has been implemented in jurisdictions such as France, Taiwan, and South Korea, and which is in the process of being enacted in the UK and New Zealand, is viewed by many policy makers as a fair and effective means of addressing the problem of online unauthorized file sharing. Although each country has adopted or proposes different balances, the key characteristics of these systems are: (1) rights holders monitor P2P networks for illegal downloading activities; (2) rights holders provide ISPs with convincing proof of infringements being committed by an individual at a given IP address; (3) educational notices are sent through an ISP to the account holder informing him or her of the infringements and of the consequences of continued infringement and informing the user that content can be lawfully acquired online; and (4) if the account holder repeatedly ignores the notices, a tribunal may take deterrent action, with the most severe sanctions reserved for a court.
Graduated response systems such as the ones mentioned above are effective and proportionate. The French system was recently reviewed and approved by a national constitutional council as respecting the country’s constitutional protections and the European Union’s privacy directives. In the United Kingdom, a test of the graduated response system showed that 70% of customers stopped infringing in the six month period after receiving the first notice, with a further 16% stopping after the second notice. Respected authorities on copyright such as Alain Strowel have characterized graduated response as an important evolution of copyright law that will address a real deficiency in the present system without unduly impacting individual liberties.
Detractors of “three strikes” systems often assert that the termination of an Internet account is the only sanction used in these systems. This is patently false. The UK government, for example, identified a range of less severe sanctions to address the problem of repeated infringements, including blocking specific sites or protocols, capping the speed of a subscriber’s Internet connection or volume of data traffic, and content identification and filtering. These kinds of sanctions would allow for the avoidance of Internet account termination except in the most extreme circumstances, and would not impact on other services such as a telephone or cable television service.
In its cabinet paper, the New Zealand government recognized the critical importance of providing an efficient, low-cost, proportionate, and credible regime to deter individuals from infringing copyright and to support the New Zealand creative industries. It described graduated response as being an emerging international trade standard, whose timely implementation would be beneficial for New Zealand. After holding extensive consultations, the New Zealand government concluded that there was a consensus that the proposed graduated responses system represented a reasonable compromise between the interests of rights holders, ISPs, and consumers.
Graduated responses systems are not intended to be anti-consumer or heavy handed. To the contrary, user interests and their privacy and procedural rights are respected. Instead of being haled into court for copyright infringements, users receive multiple notices before any action is taken by rights holders. These notices provide ample opportunities to change consumer behaviour from unauthorized file sharing to purchasing content legally. When proceedings are taken, there are procedural safeguards to ensure that sanctions are only imposed on the real offenders, and that they are proportionate.
A graduated response system that is proportionate, respectful of privacy, limited to clear cases of infringement, and supervised by the courts or other tribunals, is likely to be a win-win proposition for all stakeholders in Canada as well. It would accomplish the dual goals of reducing online piracy and increasing legitimate sales through consumer education and the knowledge that a deterrent exists if illegal file sharing does not cease.
While graduated response will never eradicate online infringement altogether, it would also give rights holders and ISPs the necessary protection they need to develop innovative business models such as the subscription plans created by European ISPs like Orange and BSkyB, and by mobile providers such as Nokia and Sony Ericsson. Bringing together graduated response with these access-based models would give users a safe, affordable and reliable means to get the creative content they desire while fostering innovation, creativity, competition and investment in intellectual property.
The Canadian government has stated on multiple occasions that it intends to adopt best practices in upgrading Canadian copyright laws. Graduated response systems are now recognized as being critical instruments of copyright policy. Accordingly, we urge the government to critically examine these systems and to include a graduated response system in any new copyright reform bill that is introduced.
*Note by Barry Sookman:
Since writing this article, I came across an economic analysis of graduated response by Olivier Bomsel and Heritiana Ranaivoson entitled “Decreasing Copyright Enforcement Costs: The Scope of a Graduated Response”, Review of Economic Research on Copyright Issues, 2009, vol. 6(2), pp.13-29. The authors argue that in the current digital environment the difficulty in enforcing copyright rights online provides incentives to free ride on copyright by consumers. Internet users are not deterred from illegally downloading content because the probability of being caught and the fines associated with being caught are too low. They contend that the behaviour of the internet user is determined by the expected fine — the perceived probability of being caught multiplied by the amount of the fine and that the way to deter infringement is to find a way to create a greater potential sanction that can act as a deterrent to illegal downloading. They argue that graduated response can fulfill this function.
 New Zealand Ministry of Economic Development, “Cabinet Paper: Illegal Peer-to-Peer File Sharing”
 Alain Strowel, “Internet Piracy as a Wake-up Call for Copyright Law Makers—Is the ‘‘Graduated Response’’ a Good Reply?”  1 W.I.P.O.J. 75