“Participants stressed the importance of ACTA as an agreement that will establish an international framework for their efforts to more effectively combat the proliferation of counterfeiting and piracy, which undermines legitimate trade and the sustainable development of the world economy.

While ACTA aims at establishing effective enforcement standards for existing intellectual property rights, it is not intended to include new intellectual property rights or to enlarge or diminish existing intellectual property rights.

ACTA will not interfere with a signatory’s ability to respect fundamental rights and liberties. ACTA will be consistent with the WTO Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the Declaration on TRIPS and Public Health. Participants reiterated that ACTA will not hinder the cross-border transit of legitimate generic medicines, and reaffirmed that patents will not be covered in the Section on Border Measures. ACTA will not oblige border authorities to search travellers’ baggage or their personal electronic devices for infringing materials.”

Participants in the meeting agreed that the next meeting would be hosted by the United States. They also reaffirmed their commitment to continue their work with the aim of concluding ACTA as soon as possible in 2010.

In placing Canada on this list, the USTR stated the following: 

Canada will remain on the Priority Watch List in 2010. The United States looks forward to the government of Canada’s implementation of its previous commitments, recently reaffirmed in 2010, to improve IPR protection, and is encouraged by the high level of cooperation between the Canadian and United States governments on IPR matters. However, Canada has not completed the legislative reforms in the copyright area that are necessary to deliver on its commitments. The United States urges Canada to enact legislation in the near term to update its copyright laws and address the challenge of Internet piracy. Canada should fully implement the WIPO Internet Treaties, which Canada signed in 1997. Canada’s weak enforcement of intellectual property rights is also of concern, and the United States continues to encourage Canada to improve its IPR enforcement system to provide for deterrent sentences and stronger enforcement powers. In particular, border enforcement continues to be weak. The United States encourages Canada to provide its border officials with the authority to seize suspected infringing materials without the need for a court order. The United States will continue to follow Canada’s progress toward implementing an adequate and effective IPR protection and enforcement regime, including its progress on actions to address Internet piracy and improve border enforcement.

The USTR  Press Release which accompanied the report explained the background and methodology used in creating it:

“USTR reviewed 77 trading partners for this year’s Special 301 Report, and placed 41 countries on the Priority Watch List, Watch List, or the Section 306 monitoring list.   

The Special 301 designations and actions announced in the Special 301 Report are the result of close consultations with affected stakeholders, interested parties, foreign governments, and Congress, as well as discussions between interested federal agencies.   

This year USTR enhanced its public engagement activities, which yielded 571 written comments from interested parties, a significant increase from 2009. USTR made the submissions it received available to the public online at www.regulations.gov, docket number USTR-2010-0003. In addition, on March 3, 2010, USTR conducted a public hearing to let interested persons inform the interagency Special 301 Subcommittee of issues relevant to the review. The hearing included testimony from 23 witnesses, ranging from foreign governments to industry representatives to non-governmental organizations. A transcript of the hearing is available at http://www.ustr.gov/webfm_send/1726.   

Trading partners on the Priority Watch List do not provide an adequate level of IPR protection or enforcement, or market access for persons relying on intellectual property protection. China, Russia, Algeria, Argentina, Canada, Chile, India, Indonesia, Pakistan, Thailand, and Venezuela are on the Priority Watch List. These countries will be the subject of particularly intense engagement through bilateral discussion during the coming year.  

Twenty-nine trading partners are on the lower-level Watch List, meriting bilateral attention to address underlying IPR problems: Belarus, Bolivia, Brazil, Brunei, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Finland, Greece, Guatemala, Italy, Jamaica, Kuwait, Lebanon, Malaysia, Mexico, Norway, Peru, Philippines, Romania, Spain, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan, and Vietnam… 

Our process of broad consultations is designed to ensure that Special 301 decisions are based on a robust understanding of often complex intellectual property issues and to help facilitate sound, well-balanced assessments of developments in particular countries. USTR necessarily conducts this assessment on a case-by-case basis, based on the particular facts and circumstances that shape IPR protection and enforcement regimes in specific countries. As discussed in the Report, USTR will continue to work closely with the governments of listed countries.”

A case in point is recent article published by the Ottawa Citizen  and other Canwest newspapers such as the Montreal Gazette , Edmonton Journal, Calgary Herald, Windsor Star, and the Vancouver Sun dealing with ACTA. The article written by Vito Pilieci made a number of inaccurate statements about ACTA including the following statements: 

• The draft text includes enhanced search powers for border-crossing guards, allowing them to comb through the personal computers and iPods of travellers.
• The agreement will also place more responsibility on Internet service providers, such as Rogers and Bell, to become content police and prevent users from sharing pirated content over the Internet.
• Punishment for repeat offenders includes a ban from the using the Internet for up to 12 months.

Some of the assertions made in the article have been repeatedly made by Prof. Geist whose interpretations of the leaked ACTA text are widely distributed in Canada, although he was not specifically quoted in this particular article. See, Fear Mongering and Misinformation Used to Slag ACTA and A reply to ACTA critics. The sources referred to in the article included Gwen Hinze, International Director of the Electronic Frontier Foundation (EFF) and David Fewer, director of the Canadian Internet Policy and Public Interest Clinic (CIPPIC) at the University of Ottawa, although the statements in the article were also not directly attributed to them.

None of  the above statements made by Mr. Pilieci about ACTA are in the draft publically available treaty text and many organizations that support the Canadian Government’s participating in ACTA are starting to notice and speak out against this kind of inaccurate reporting. For example, in a letter to the editor of the Ottawa Citizen, the Canadian Chamber of Commerce pointed out that “Canadians stand to benefit, not lose, from the modernization of our outdated anti-counterfeiting legislation”. The letter also called out inaccuracies in the article.

According to the Chamber:

“In a presentation to ACTA stakeholders on March 22, 2010, Luc-Pierre Devigne, Head of Intellectual Property for the European Commission, specifically noted that “there would be no new provisions on customs searches for individual laptop or MP3 players”. The draft text even contains specific proposed wording that excludes personal/non-commercial items such as iPods. The draft text also has a specific term that ensures that ISPs have no obligations to monitor their customers’ activities. Mr. Devigne also stated that there will be no requirement for any “3-strike rule” in ACTA. The draft text confirms this assertion. Clearly, ISPs would not have to become online “content police”. Finally, punishment for repeat offenders, through an Internet ban or otherwise, is not in the draft agreement.”

The Chamber also expressed its confidence that the Canadian Government is representing the interests of Canadians who are concerned about the adverse health, safety, and economic effects of counterfeiting and want to amend our laws to combat it.

The Chamber letter stated:

“The Canadian Government has acted in a responsible and informed manner in representing the interests of the people of Canada. And Canadians, properly informed by the media, will support a treaty that aims to reduce a growing problem – one that a recent Standing Committee of Parliament unanimously concluded is ‘injuring people or causing adverse health effects,’ and in which ‘organized crime is involved’.”

“It is untrue that this treaty is somehow different from other treaties in requiring Canada to alter domestic legislation. Like every treaty negotiated since the dawn of time, the ACTA talks involve give and take by each of the participating countries.”

As I stated yesterday, “As the debate about ACTA continues, the public should realize that simply relying on secondary and tertiary summaries of the draft treaty will not provide an accurate assessment about what the treaty is really about. You really need to check your sources.”

Consider the following summary by Prof. Geist in yesterday’s Toronto Star article which was re-published in his blog this morning. Prof. Geist says:

“the text confirmed many fears about the substance of ACTA. If adopted in its current form, the treaty would have a significant impact on the Internet, leading some countries to adopt three-strikes-and-you’re-out policies that terminate subscriber access due to infringement allegations, increasing legal protection for digital locks, mandating new injunction powers, implementing statutory damages provisions worldwide, and engaging in widespread data sharing across national borders.”

Here again, Prof. Geist is misrepresenting what the actual published text of the draft treaty says. As I have pointed out in two previous articles, Fear Mongering and Misinformation Used to Slag ACTA and A reply to ACTA critics, the draft text would not mandate any “countries to adopt three-strikes-and-you’re-out policies that terminate subscriber access due to infringement allegations”. This is pure scaremongering.

The draft treaty would require contracting countries to provide legal protection for technological measures, but these measures have already been implemented around the world throughout the EU and elsewhere in order to comply with the WIPO Internet Treaties. Of course, ACTA would require Canada to “increase” protection for TPMs. We don’t have any protection for TPMs now and we are the only G20 country not to have any such protection.

It is also hard to understand Prof. Geist’s criticism of international cooperation including sharing of information to combat counterfeiting. Prof. Geist was an ardent supporter of Bill c-27, the Electronic Commerce Protection Act. That Bill would have given the Canadian Government extensive rights to share data with other countries to fight SPAM. Prof. Geist endorsed these provisions in that Bill, even testifying before the Parliamentary Industry Committee studying the Bill supporting international data sharing to fight SPAM. (See, Lines 1715-1722 of his testimony). It is well known that organized crime is extensively involved in counterfeiting activities. It is puzzling that Prof. Geist believes that international cooperation is essential when dealing with SPAM but not counterfeiting. SPAM may clutter our in-boxes and cause economic harm. But, as two Parliamentary Standing Committees recently found, counterfeiting causes economic harm and also poses serious health and safety issues for Canadians. See, Standing Committee on Public Safety and National Security, Counterfeit Goods in Canada – A Threat to Public Safety (May 2007), Standing Committee on Industry, Science and Technology, Counterfeiting and Piracy Are Theft (June 2007)

As the debate about ACTA continues, the public should realize that simply relying on secondary and tertiary summaries of the draft treaty will not provide an accurate assessment about what the treaty is really about. You really need to check your sources.

According to the report, the link can be seen in all forms of property including intellectual property. Dealing with the latter, the report states:

“The modern economy relies not only on physical property rights but also intellectual property rights (IPRs). Intellectual property rights are exclusive rights over creations of the mind. These include inventions, literary and artistic works, and symbols, names, images, and designs used in commerce.6 The world economy has come to depend on IP goods – from airplanes to business software, and from pharmaceuticals to cell phones.

In many ways, intellectual property rights play a similar role to physical property rights. Secure   intellectual property rights create incentives for innovation just as secure property rights create incentives for production. Similarly to physical property rights, IPRs reduce transaction costs. For example, trademarks signal information about the quality of products, which reduce consumer search costs (Baroncelli, Krivonos, & Olarreaga, 2004).

The challenge of protecting intellectual property rights, however, is even more daunting compared to physical property rights because theft of IPRs is facilitated by their own intrinsic qualities. Therefore, countries with weak IPRs require substantial resources to build an effective enforcement system of IPRs. While some countries may feel this investment is beyond their means, they need to realize that an effective IPR system is an important ingredient for long-term economic success. In addition to spurring domestic innovation, strong intellectual property rights increase incentives for foreign direct investment (Branstetter & Saggi, 2009), which in turn also  leads to economic growth (Saggi, 2002).”

Yesterday, Prof. Geist  posted a blog claiming that “they highlight the absurdity of the IIPAs ongoing campaign characterizing Canada as weak on IP.” Further he claims the “ranking is all the more remarkable since one of the primary data sources for the ranking is the IIPA itself.  In other words, even after using IIPA data, Canada ranks alongside many other countries that are typically applauded by the IIPA for their IP policies.”

As Prof. Geist pointed out, the IPRI Index focuses on three areas: Legal and Political Environment, Physical Property Rights, and Intellectual Property Rights. The IPR sub-index measures a countries’ performance in protecting all intellectual property rights including patents, trade secrets, trademarks, industrial designs, and copyrights including copyright piracy.

One would expect that Canada would have a relatively high overall ranking on the IPR sub-index given that Canada is a member of many of the leading IP conventions and treaties such as the Berne Convention, TRIPS, and the Rome Convention. (We still haven’t jointed the WCT or WPPT, however). On the overall IPR sub-index, howoever, Canada did not make the top 10 which included the US, Japan, Denmark, Finland, Germany, and Australia. Canada finished 13th, with a score that declined from our 2009 score (by -01).  

The report contains is no specific ranking or sub-sub-index for copyright piracy, which was a main criticism of the IIPA 301 Report which Prof. Geist references. Accordingly, one cannot conclude as Prof. Geist does that Canada has adequate copyright laws merely because of the overall IPR sub-index. Moreover, you cannot conclude that Canada has adequate copyright laws to address physical or digital piracy from the overall IPR sub-index either. 

However, in the Canada country profile, not referred to by Prof. Geist, the report concluded that “The IPR scores have remained relatively unchanged for the last four years. Copyright piracy levels continued to be somewhat high for a well developed country – estimated at an average of 33 percent. As a result, the country was added to the “priority watch list” by the U.S. Trade Representative. Moreover, reflective of the lack of progress with respect to IPR protection is the fact that expert [opinion] on protection of intellectual property rights has deteriorated since 2009.”

So, infact, the report concludes that Canada has higher piracy levels than would be expected for a developed country and that our position in the world rankings are declining as a result. This conclusion is hardly a basis for anyone to conclude that we don’t need copyright reform in this country to deal with digital piracy or that the IIPA was wrong in its Section 301 Report to focus on Canada’s weak copyright laws  as they relate to combating digtital piracy. Here again we have Prof.Geist Toying with funny math to downplay Canada’s role as a piracy haven.

 The IIPA call to modernize the Canadian Copyright Act is one of a growing list of calls by domestic organizations and foreign governments such as the EU and the US which have demanded that we amend our laws to create a positive legal environment to combat counterfeiting and piracy and to foster the creative industries.

 The executive summary in the IIPA report describes the defects in Canadian copyright law as follows:

 “More than thirteen years ago, Canada played an important and positive role in negotiation of the WIPO Internet Treaties. But today, Canada stands virtually alone among developed economies in the OECD (and far behind many developing countries) in failing to bring its laws into compliance with the global minimum world standards embodied in those Treaties. In 2008, its government finally tabled a bill (Bill C-61) that would do part of the job of meeting global standards; but no action was taken on it. In 2009, government pledges to table a new bill went unfulfilled. While significantly flawed, particularly with regard to the role of service providers in combating online piracy, Bill C-61 is likely to provide a starting point for future consideration of copyright reform. Canada should be encouraged to enact a new version of the bill, with major flaws corrected and necessary improvements in several areas, this year. Canada’s enforcement record also falls far short of what should be expected of our neighbor and largest trading partner, with ineffective border controls, insufficient enforcement resources, inadequate enforcement policies, and a seeming unwillingness to impose deterrent penalties on pirates. Canada’s parliamentary leadership and government, at the highest levels, have acknowledged many of these deficiencies, but have done very little to address them. As a consequence, the piracy picture in Canada is at least as bleak as it was a year ago, and it is fast gaining a reputation as a haven where technologically sophisticated international piracy organizations can operate with virtual impunity. The fact that Canada, home to 0.5% of the world’s population, hosts 4 of the top 10 illicit BitTorrent sites in the world, speaks eloquently for itself. To underscore U.S. insistence that Canada finally take action to address the serious piracy problem it has allowed to develop just across our border, and that it bring its outmoded laws up to contemporary international standards, IIPA recommends that Canada be maintained on the Priority Watch List in 2010.”

 The IIPA set out the following actions for Canada to take to rectify the situation:

• Enact legislation bringing Canada into full compliance with the WIPO “Internet” Treaties (WIPO Copyright Treaty [WCT] and WIPO Performances and Phonograms Treaty [WPPT])

 • Create strong legal incentives for Internet Service Providers (ISPs) to cooperate with copyright owners in combating online piracy

 • Amend the Copyright Act to clarify the scope of the private copying exception for sound recordings

 • Amend the Copyright Act to clarify liability for those who operate illicit file-sharing services, or whose actions are otherwise directed to facilitating, encouraging or contributing to widespread infringement

 • Create criminal liability and penalties for counterfeiting offenses commensurate with what is provided in the Copyright Act

 • Make legislative, regulatory or administrative changes necessary to empower customs officials to make ex officio seizures of counterfeit and pirate product at the border without a court order.

 • Complete the process of making proceeds of crime legislation applicable to proceeds from the distribution, sale and importation of pirated goods, and make the other legal and policy changes to enforcement called for by parliamentary committees.

 • Increase resources devoted to anti-piracy enforcement both at the border and within Canada

 • Direct the Royal Canadian Mounted Police (RCMP), Canadian Border Services Agency (CBSA), and Crown prosecutors to give high priority to intellectual property rights enforcement, including against retail piracy and imports of pirated products, and to seek deterrent penalties against those convicted of these crimes.

Of course, the actual text of the treaty is not know by the public. So commentators have relied on their interpretations of leaked documents to try and derail it.

When the criticisms are examined, it will be readily apparent that certain ACTA critics misapprehend what has been disclosed and make assertions or reach conclusions that cannot be justified based on the leaked documents. 

Prof. Geist’s Assertions

For example, Prof. Geist published several recent blogs dealing with ACTA.  In one blog, Estimating The Cost of a Three-Strikes and You’re Out System, he attempts to argue against any agreement that would include a graduated response system. He starts his blog with the statement that the discussions in Mexico

“is likely to turn to the prospect of supporting three-strikes and you’re out systems that could result in thousands of people losing access to the Internet based on three allegations of copyright infringement. Leaked ACTA documents indicate that encouraging the adoption of three-strikes – often euphemistically described as ‘graduated response’ for the way Internet providers gradually send increasingly threatening warnings to subscribers – has been proposed for possible inclusion in the treaty.”

He refers to countries such as New Zealand, UK, and France as countries that either have or are implementing such systems.

However, as I pointed out previously in response to similar statements by Prof. Geist, from what is known from the leaked documents, what is actually being proposed is a requirement that ISP safe harbors be tied to eligibility conditions that ISPs “put in place policies to deter unauthorized storage and transmission of IP infringing content”. This self-regulatory approach currently exists in s.512(i) of the DMCA and in comparable legislation in Australia and in other countries.  

Both the leaked EU Memo and the EU Analysis of the US proposal makes this clear.

Section 3 of the EU Memo states in part:

“On the limitations from 3rd party liability: to benefit from safe-harbours, ISPs need to put in place policies to deter unauthorized storage and transmission of IP infringing content (ex: clauses in customers’ contracts allowing, inter alia, a graduated response).  From what we understood, the US will not propose that authorities need to create such systems. Instead they require some self-regulation by ISPs.”

The EU Analysis document states:

“The aim of paragraph 3(b) is to establish a system that can be considered to make the exemptions from liability subject to specific conditions…

The proposed paragraph 3(b)(i) adds an important prerequisite for the limitations on liability to apply: the intermediary must adopt and reasonably implement a policy ‘to address the unauthorized storage or transmission of materials protected by copyright or related rights’…”

The leaked documents, therefore, do not support the conclusion that a state sanctioned graduated response system is being proposed as part of ACTA.

Prof. Geist argues that the system being proposed “is likely to turn to the prospect of supporting three-strikes and you’re out systems that could result in thousands of people losing access to the Internet based on three allegations of copyright infringement.”  However, regardless of whether Prof. Geist is referring to a state sanctioned graduated response system or to a self-regulatory eligibility condition, his statements show he continues to misapprehend or inaccurately describe how these systems work.   

State sanctioned graduated response systems have the following characteristics: (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. 

Prof. Geist says that this is three strikes “euphemistically described as “graduated response”. In fact, graduated response is “euphemistically” described by Prof. Geist and others as three strikes in order to demonize it.  As, I have previously described , the graduated response systems such as what has been enacted in France and what is being implemented in the UK or New Zealand have built in protections to avoid precisely the consequences Prof. Geists say they have. Prof. Geist continues to slag ACTA by misdescribing how these graduated response systems work.

In so far as Prof. Geist intended to refer to a self-regulatory eligibility condition, his statement that this is a “three-strikes and you’re out systems that could result in thousands of people losing access to the Internet based on three allegations of copyright infringement” is also inaccurate.

The US has had ISP safe harbours since enacting the DMCA in 1998. Congress enacted them in an effort to resolve the unique copyright enforcement problems caused by the widespread use of the Internet. It recognized that tackling copyright infringement on the Internet required balancing the competing interests of several groups. The first set of competing interests includes those of copyright holders and end users. The DMCA intended to balance the need for rapid response to potential infringement with the end-users’ legitimate interests in not having material removed without recourse. The second set of competing interests were those of copyright holders and ISPs whose services may be used to infringe copyrights. The DMCA intended to balance the interests of these parties by creating a mechanism for rights holders to inform ISPs of potentially infringing conduct while, at the same time, providing greater certainty to service providers concerning their legal exposure for infringements that may occur in the course of their activities.  See Ellison v. Robertson, 357 F.3d 1072, (9th Cir.2004); In re Aimster Copyright Litigation, 334 F.3d 643, (7th Cir.2003);  Rossi v. Motion Picture Assoc. of America, 391 F.3d 1000, (9th Cir.2004).

This balancing effort resulted in a statute that creates incentives for service providers and copyright owners to cooperate to detect and deal with copyright infringements that take place in the digital network environment. For instance, a copyright owner who suspects that his/her copyright is being infringed may follow the notice and take down provisions set forth in § 512(c)(3) of the DMCA. Once properly notified, a service provider must respond expeditiously to remove, or disable access to, the material that is claimed to be infringing. If a service provider fails to take down the potentially infringing material, it exposes itself to full copyright liability.  Rossi,  Recording Industry Ass’n of America v. Verizon Internet Servs., 351 F.3d 1229 (D.C.Cir.2003).

These notice and take down provisions form part of the several safe harbors established by the DMCA that protect certain common activities of ISPs. They provide protection from liability for: (1) transitory digital network communications; (2) system caching; (3) information residing on systems or networks at the direction of users; and (4) information location tools.

To be eligible for any of the safe harbors, a service provider must meet a series of threshold conditions. One of them is the eligibility requirement that appears to be part of what is being considered for ACTA. Under § 512(i) of the DMCA for a service provider to have the benefit of the safe harbors it must show that it

“(A) has adopted and reasonably implemented, and informs subscribers and account holders of the service provider’s system or network of a policy that provides for the termination in appropriate circumstances of subscribers and account holders of the service provider’s system or network who are repeat infringers”.

This provision has been interpreted many times by US courts. Importantly, they have interpreted it as a flexible provision which does not mandate any specific circumstances e.g. “three strike” before an account is terminated. Rather the standard is “appropriate circumstances”. Further, it has been held that a “standard of reliability and verifiability” is required before an ISP would be required to terminate a repeat infringer’s account in order to claim safe harbor eligibility.  See, Corbis Corp. v. Amazon. com, Inc., 351 F. Supp. 2d 1090 (W.D.Wash. 2004), Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102 (9th Cir.2007), UMG Recordings, Inc. v. Veoh Networks Inc 2009 WL 3422839 (C.D.Cal. Sept 11, 2009).

Prof. Geist goes on to state that Spain has rejected graduated response. What he doesn’t disclose, however, is that Spain has passed legislation that will enable the authorities to shut down file-sharing sites rapidly. So it has taken another approach to dealing with massive online file sharing.

Prof. Geist then purports to suggest that countries that are pursuing graduated response have “faced formidable barriers”. He refers to New Zealand which he says “withdrew a three-strikes proposal in the face of public protests (a much watered-down version was floated at the end of last year)”. Infact, one of the main  reasons for the delay in implementing section 92A besides industry and subscriber concerns was the inability of rights holders and ISPs to reach an agreement on a voluntary ISP Copyright Code of Practice (the Code).  The Code would have provided guidance for ISPs and rights-holders on how section 92A would operate. The Government took the initiative in its December 2009 cabinet paper, to outline a full fledged (not watered down) graduated response regime.

Prof. Geist then states that the UK’s proposal has “been hit with hundreds of proposed amendments at the House of Lords”. It is not unusual for any complicated Bill to have amendments proposed to it. Further, many of the proposed amendments had nothing whatsoever to do with the graduated response portion of the Bill. The UK government is still firmly resolved to move ahead with the legislation.

Prof. Geist then refers to “France’s adventure with three-strikes” which he states includes “a Constitutional Court ruling that the plan was unconstitutional”.  He failed to disclose, however, that France has actually passed its legislation and that the French Constitutional Council ruled in October 2009 that the French bill was in conformity with the French Constitution.

Prof. Geist then goes on to argue against a graduated response system because of its costs which he says the UK Government estimated at 500 million pounds over ten years and because of a potential for 40,000 people to lose their Internet access due to anticipated increases in subscriber fees. 

The UK impact assessment referred to by Prof. Geist actually found that the estimated costs would be between £290 – 500 million and that this “cost would have a relatively small but permanent effect of reducing demand for broadband connection between 10,000- 40,000”.  Further, the figures assume that all of the costs associated with the graduated response system would fall on the ISPs and would then be passed onto consumers.  However, it appears that the UK Government plans to pass on 75% of the costs to rights holders. If so, the impacts would be far less than what had been estimated.

Far more importantly, however, Prof. Geist examines only the costs of implementing a graduated response system. He never takes into account the benefits that would result from such a system. However public policy mandates that costs and benefits of any proposal be fully evaluated.  

Prof. Geist’s references to the UK impact assessment omit entirely its analysis of the far greater economic benefits associated with graduated response. The UK assessment pegged the benefits to rightsholders of implementing a graduated response system alone at £1.7 billion.

The assessment also discussed at length the rational for graduated response. For example, the report states:

“The UK Government attaches particular importance to establishing the UK as a leading digital economy for several reasons:

• A Digital Britain can make a significant contribution to the Government’s New Industry, New Jobs agenda.
• A Digital Britain can play a crucial role in helping the government deliver a number of wider policy objectives.
• Broadcasting, the creative industries and the information and communication technology sectors are of major economic importance in the UK.”

“First, it can play a major part in helping the UK emerge from recession by encouraging innovation – one of the five drivers of productivity – in new digital and broadband technologies and content.  Second, it can provide the telecommunications infrastructure that UK businesses – particularly those in the content and creative industries – crucially rely on in order to compete effectively in the global economy.”

“Illegal file sharing of audio, video, data, or anything in digital format between users on a computer network has increased significantly in the last few years. This has served to reduce the incentive for the creative industries to invest in the development, production and distribution of new innovative content.”

The UK impact assessment then summarized the costs and benefits in the table set out below:

The assessment also canvassed the various policy options available to address online file sharing and the rational for choosing graduated response over other options.

“The sheer scale of P2P file-sharing means it is not practicable to take all those involved to court: right-holders estimate there are some 6.5 million people in the UK who are active unlawful filesharers.”

“Further, due to the nature of the technology and the way in which individual infringements are identified, it is not possible for rights holders to identify who are the most frequent or serious file-sharers, making targeted legal action extremely difficult if not impossible.  Legislation is needed to require ISPs to notify subscribers that they appear to be engaged in unlawful activity so that they can alter their behaviour.  It is also needed to help rights holders to take targeted action about the most serious infringers.”

“An important feature of creative industries like the music, software and film industries is that they are characterised by strong intellectual property rights (IPR).  Strong IPR creates an incentive to invest in the development of new and more innovative products since it permits individuals to capture the gains from the new products it creates.”

“However with illegal file-sharing the incentive to invest in new and mainstream artists is undermined because industry cannot capture all the gains generated from its investment.  This is because the public good nature of file-sharing and the spillover effects which exist creates a free-riding problem whereby users may enjoy the benefits of file-sharing without paying the product’s price.  The disincentive to invest in artists as of result of free-riding is a particular problem in the music, film and videogames industries because they are characterised by large investment costs and a relatively high risk of failure.”

“Content companies spend vast amounts of money investing in the success of a product (e.g. film, song or videogame).  These costs are typically in production, marketing and promotion of creating and selling content to the consumer (advance payment to artists, advertising costs, retail store positioning fees, press and public relations to the artist, television appearances and travel, publicity and internet marketing). The industry is characterised by large fixed costs and low variable costs. The increasing trend for creative content to be traded digitally may have seen a change in the investment cost structure.  Overall, some costs have remained high like marketing costs but distribution and production costs have decreased with an overall effect of increasing variable costs relative to fixed costs which may give small, relatively less known artists more room for manoeuvre.”

Prof. Geist’s one sided analysis of the costs associated with graduated response has also been criticised by Prof. Olivier Bomsel for failing to take into account how graduated response can best internalize the externalities associated with copyright infringement.  Prof. Bomsel is a well known Professor of Economics and was involved in the design and the implementation of the French law on copyright enforcement over the Internet.  

 In support of his argument against graduated response, Prof. Geist then alleges that the “UK estimates are consistent with a 2006 Industry Canada commissioned study. However, the Industry study did not deal with any graduated response proposal. It focused on the costs associated with a notice and notice system, a notice and takedown system, and a compulsory license regime. Nevertheless, the report concluded that notwithstanding the costs associated with notice and notice or notice and takedown that “both approaches are economically beneficial for ISPs and other stakeholders in that economic uncertainty is removed.”

Other Criticisms of ACTA

Prof. Geist was not alone in trying to derail ACTA.  A consortium of groups consisting of the Washington-based Public Knowledge, the Ottawa-based Canadian Internet Policy and Public Interest Clinic (CIPPIC), and Quebec’s Union des consommateurs, also weighed in on the debate last week. Their views were given extensive media coverage including coverage in Canada from from CBC.ca, Canadian Press, and Radio-Canada.InternetNews.com.

The CBC article “Consumer advocates declare war on copyright treaty” stated the following:

“A number of these organizations on Monday launched a joint declaration of war on ACTA, which they say threatens the fundamental freedoms of the people living in member countries.”

“This agreement will restrain certain rights and freedoms, particularly freedom of expression and protection of privacy,” the declaration said.

“Leaked documents from the ACTA negotiations, going on for the past year and a half, show that a number of anti-consumer provisions are being discussed, the groups said.  They include:

• Allowing internet service providers to cut customers off if sharing copyrighted files is alleged.
• Limiting the interoperability of legally acquired digital content, such as music or movies.
• Authorizing border guards to search and seize laptops and MP3 players if copyright infringing material is found on them.”

These statements are inaccurate and misleading. They also potentially reveal a lot about who these ACTA critics are really trying to protect.

The statement that ACTA will allow “internet service providers to cut customers off if sharing copyrighted files is alleged” is inaccurate and misleading. This is essentially the inaccurate statement made by Prof. Geist which is addressed above.

There is nothing in the leaked documents aimed at “Limiting the interoperability of legally acquired digital content, such as music or movies”. The leaked documents suggest that ACTA would require that parties joining it to enact measures to protect technological measures along the lines of legislation already existing in most countries around the world, except Canada. A comment on Footnote 8 in the EU Analysis suggests that the US proposal “may not require” interoperability of content downloaded for one device to be played on another device. But, there is a big difference between a term that would limit or prohibit content interoperability (which as the EU Analysis pointed out does not exist in the EU; “Recital 48 to CISD uses the term ‘implies no obligation’”) and one that leaves it open to each country to decide whether or how to address interoperability.  

Moreover, ACTA is not about authorizing “border guards to search and seize laptops and MP3 players if copyright infringing material is found on them”. Douglas George of DFAIT made this clear in his April 2009 presentation to Canadians when describing “What ACTA is NOT About”: “Seizing portable music players and laptops at the border”.

The statement that ACTA is “anti-consumer” potentially reveals a lot about its detractors. The groups that have coalesced to oppose ACTA seem to believe that graduated response is “anti-consumer”. I had always thought that a consumer was someone who legitimately acquires some good or service for that person’s own use. However, the “consumers” referred to by the coalition appear to be those individuals who engage in repeated acts of copyright infringement despite repeated warnings to stop. So, is the moral fight against the substance of ACTA’s proposed provisions related to graduated response by these detractions really about defending the right to take the creative labour and investments of creative individuals and industries for free?

The cases summarized include the following: Robinson v. Les Films Cinar Inc, 2009 QCCS 3793;  Drolet v. Gralsbotschaft, 2009 FC 17;  Atomic Energy of Canada Limited v. Areva NP Canada Ltd., 2009 FC 1119;  Beach v. Toronto Real Estate Board, 2009 CanLII 68183 (ON S.C.);  Neugebauer v. Labieniec, 2009 FC 666;  Canwest Mediaworks Publications Inc. v. Murray, 2009 BCSC 391;  Peak Innovations Inc. v. Meadowland Flowers Ltd., 2009 FC 661;  Microsoft Corporation v. PC Village Co. Ltd., 2009 FC 401;  Western Steel and Tube Ltd. v. Erickson Manufacturing Ltd., 2009 FC 791;  Litecubes, L.L.C. v. Northern Light Products, Inc., 2009 BCSC 181;  IceTV  Pty Limited v Nine Network Australia Pty Limited [2009] HCA 14 (22 April 2009);  Fisher v Brooker & Ors [2009] UKHL 41 (30 July 2009);  Editions du Seuil v Google Inc, Tribunal de Grande Instance de Paris 3ème chambre, 2ème section Ruling of December 18, 2009;  Lucasfilm Ltd & Ors v Ainsworth & Anor [2009] EWCA Civ 1328 (16 December 2009);  Dish Network LLC v Zentek International Co Ltd [2009] HKEC 220;  RecordTV Pte Ltd v MediaCorp TV Singapore Pte Ltd [2009] SGHC 287;  IsoHunt Web Technologies, Inc v EMI Group Canada Inc. Sup. Ct. B.C. March 11, 2009;  Columbia Pictures Industries Inc v Fung (C.D.Cal. Dec 21, 2009);  Arista Records LLC v Usenet.com Inc. 91 USPQ2d 1744 (S.D.N.Y.2009);  The Pirate Bay Case, Stokholm District Court, April 17, 2009;  Rein v Mininova B.V., District Court of Utrecht, 26 August 2009;  Sony BMG  Music Entertainment v Tenenbaum, 2009 WL 4547019 (D.Mass. Dec 7, 2009)

Sookman LSUC Copyright Presentation 2009 Year in Review

In a recent post based on the OECD study, OECD Confirms Canada Among Lowest Sources Of Counterfeiting,  Prof. Michael Geist asserts that statements about the piracy rates in Canada by the Canadian Chamber of Commerce and others are inflated and “exaggerated”. He claims that the “OECD data would suggest that counterfeiting in Canada is far lower” than these estimates and concludes that “Canada is a low piracy country despite persistent efforts to paint us as a piracy haven”.

Prof. Geist has opposed strengthening Canadian intellectual property laws to address problems associated with counterfeiting and piracy. To support his position, he has denounced statements that counterfeiting and piracy are a significant problem in Canada, contending that any such statements are exaggerated and unsupported. For example, in 2007, the Parliamentary Standing Committee on Public Safety and National Security conducted hearings to examine counterfeiting and piracy in Canada. Prof. Geist testified before the Committee on April 26, 2007, claiming that “the impact and severity of counterfeiting” was “uncertain”, that figures provided to the Committee were “wildly inflated”, that there was “limited economic impact in Canada from counterfeiting” and that Canada should not implement new laws to deal with counterfeiting and piracy.

In its report, the Committee firmly rejected Prof. Geist’s contentions and found that counterfeiting and piracy are significant problems for Canadians that require urgent action:

“Of all the witnesses heard by our Committee, only Professor Geist felt that there is likely to be limited economic impact in Canada from counterfeiting…In light of the evidence heard, there is no doubt that counterfeiting and piracy cause economic harm to intellectual property owners, private companies and Canadian governments. … [T]he representatives of industry and of law enforcement who testified to the Committee painted a rather alarming portrait of the situation in Canada. It is not only a disturbing phenomenon, but one that calls for solutions with some urgency.”  (pp 16, 17)

Against the recommendations of Prof. Geist, the Committee made fourteen recommendations including important recommendations for changes in Canadian laws to address counterfeiting and piracy.

Prof. Geist continues to denounce statements about the magnitude of counterfeiting and piracy in Canada, this time invoking the OECD report in support of his denunciations. However, his assertions are based on misinterpretations of the data.

Prof. Geist asserts in his blog that the amount of internationally traded black market goods calculated in the OECD report contradicts the figure calculated in the Canadian Chamber of Commerce report, A Time for Change: Toward a New Era for Intellectual Property Rights in Canada.  Prof. Geist does not dispute the OECD’s estimate that physical counterfeiting and piracy amount to approximately 250 billion US dollars in international trafficking each year. However, according to Prof Geist, when one applies Canada’s percentage of world trade (2.8%) to the OECD total of $250 billion, it is clear that the OECD report establishes that “counterfeiting in Canada” represents only $7 billion, or less than one-third of the Canadian Chamber’s estimate.

However, Prof. Geist either misunderstood or failed to consider or disclose that what was being measured in each case is fundamentally different. The OECD report measures only one aspect of counterfeiting and piracy – pirated and counterfeit goods traded internationally. The Canadian Chamber of Commerce report estimated that counterfeiting and piracy cost the Canadian economy $22 billion annually “in lost tax revenue, investment and innovation”. While clearly related, these are very different things, and one would expect that the actual costs to the economy of counterfeiting and piracy would be greater than the value of the counterfeit and pirated goods themselves.

The OECD report also expressly does “not include domestically produced and consumed products, or non-tangible pirated digital products”, while the Canadian Chamber expressly included counterfeiting and piracy in “both in the real world of physical products and in the virtual world of the Internet” in its estimates of the costs of counterfeiting and piracy to the Canadian economy. Indeed, in its original report, the OECD itself noted that “if these items were added, the total magnitude could well be several hundred billion dollars higher”.

Prof. Geist then asserts that Canada’s low ranking in the “General trade-related index of counterfeiting and piracy of economies” (page 5) demonstrates that “Canada is a low piracy country despite persistent efforts to paint us as a piracy haven.” What Prof. Geist fails to disclose or apparently consider is what the OECD index measures. The OECD index is based on a survey of national customs authorities who provided “information on interceptions of infringements, recorded at any time during the period 1999 to 2005”.  In other words, the international ranking is based on seizures by customs officials.

What makes this so significant is that one of the major reasons Canada has such a high incidence of counterfeit and pirate goods and a low rate of seizures is precisely because Canadian border officials do not have the power, that all of our major trading partners have, to seize counterfeit and pirate goods at the border. The Canadian Border Services Agency (CBSA) has publicly stated (at that the same hearing attended by Prof. Geist), that counterfeit goods “cannot be targeted or detained by the CBSA under the authority of the Customs Act” because “there is no legislation that specifically identifies counterfeit goods as prohibited”. It is hardly surprising that relatively few counterfeit seizures are made in Canada since CBSA does not have the independent authority to seize such goods.

Canada’s inability to effectively seize counterfeit and pirated goods at its borders is widely acknowledged as one of the major criticisms of its enforcement mechanisms, a fact supported by the RCMP (again at the same hearing that Prof. Geist testified at):

[F]rom our experiences with this crime [of counterfeiting and piracy], I’m comfortable stating that the impact is in the billions of dollars, and it is growing. … While CBSA is willing to help, and their assistance is appreciated, we recognize that they do not have the necessary authority at the ports of entry to stop such goods…as counterfeit goods are not illegal under the Customs Act. There is also a major issue with resources. Other than small joint RCMP-CBSA project teams in Montreal and Toronto, there are no dedicated investigational teams for IPR crime.

The porous nature of our borders and the need to upgrade our border controls to world standards to reduce counterfeiting and piracy in Canada, and transhipments to our trading partners, has also been noted by two parliamentary committees, three Canadian trade associations, and our major trading partners. Parliamentary Standing Committee on Public Safety and National Security (page 14), Parliamentary Standing Committee on Industry, Science and Technology (page 15), Ontario Chamber of commerce (page 5-6), Canadian Chamber of Commerce (page 18), U.S. Trade Representative ( Section 301 report, page 21),  U.S. Congressional Anti-Piracy Caucus (page 2-3), European Union (Joint Study, p87-88), and  Canadian Anti-Counterfeiting Network (CACN) (page 38).

What is astonishing is that the RCMP, two Parliamentary committees, three Canadian industry organisations ( the Canadian Chamber, Ontario Chamber and CACN), and Canada’s leading trading partners (the U.S. and EU) have all concluded that Canada has a significant counterfeiting and piracy problem pointing to our lack of border controls as a major contributor to that problem. Yet, Prof. Geist, who cites none of these studies or reports, concludes that there is a low level of counterfeiting and piracy in Canada using data that actually evidences our failure to put in place proper measures needed to combat counterfeiting and piracy in the first place. This is basically the equivalent of preventing police from conducting investigations and then citing the inevitable decrease in the number of investigations as evidence of a low crime rate.

Anti-copyright advocates often argue that there is no need to reform intellectual property laws, or to engage in negotiations over new trade agreements such as ACTA, by denying that counterfeiting or piracy is a problem. These summary denials are a convenient argument in the propaganda war against copyright reform. What is troubling, however, is the disingenuous use of statistics in support of this cause.  It is particularly disturbing coming from Prof. Geist, who holds a Canada Research Chair in Internet and E-commerce Law. Prof. Geist’s blogs and RSS feeds present only one ill-documented side of a story to a wide audience that may not have the complete background to accurately assess the merit of his claims.