The UK process was introduced expressly to address the rise in unlawful peer-to-peer file sharing, “which can reduce the incentives to invest in the development, production and distribution of new content by preventing investors in the creative industries from fully appropriating the returns on their investment.” The DEA’s grauduated response process purpose is to reduce online infringement of copyright “by introducing a system of mass notifications designed to educate consumers about copyright and bring about a change in consumer behaviour”.

Graduated response is viewed by many policy makers as a fair and effective means of addressing the problem of online unauthorized file sharing. Its key characteristics 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, some sanction may follow. See, Graduated response and copyright: an idea that is right for the times.

Some critics of graduated response contend that it is flawed because it results in unreasonable or arbitrary sanctions against innocent individuals. The Full Court of Australia in the recent iiNet case backed the reasonableness of graduated response to stop illegal file sharing. Last year the Irish High Court in EMI Records & Ors -v- Eircom Ltd, [2010] IEHC 108 held that a graduated response solution to illegal file sharing involving “detection, notification and termination” “is viable and proportionate”. The documents released by Ofcom last week highlight the processes including appeals processes used in these systems to build in procedural fairness for those identified as repeat copyright infringers.

United Kingdom

The online copyright provisions inserted into the UK Communications Act 2003 by the DEA place obligations on ISPs, when informed by copyright owners, to notify subscribers of their unlawful behaviour by generating copyright infringement reports (CIRs”). Each CIR includes a description of the apparent infringement along with supporting evidence, including the subscriber’s IP address and the time at which the evidence was gathered. The ISP matches the IP address to a subscriber and sends them a letter notifying them of the CIR(s). The ISP records the number of CIRs made against subscribers in an anonymised copyright infringement list. The copyright owner can request this list in order to see which of the reports it has made are linked to the same subscriber. It can then seek a court order to reveal the details of the subscriber, with a view to taking court action against them.

The subscriber can, however, choose to appeal each notification and each CIR within a notification. The DEA sets out the minimum grounds for appeal to an independent appeals body appointed by Ofcom. (Ofcom has discretion to add further grounds for appeal and must approve the procedures of the appeals body.)

The minimum grounds for appeal are to be set out in a code to be developed by Ofcom and which must have the following elements:

The code must provide that an appeal on any grounds must be determined in favour of the subscriber unless the copyright owner or internet service provider shows that, as respects any copyright infringement report to which the appeal relates or by reference to which anything to which the appeal relates was done (or, if there is more than one such report, as respects each of them) the apparent infringement was an infringement  of copyright, and the report relates to the subscriber’s IP address at the time of that infringement.

The code must provide that, where a ground mentioned…is relied on, the appeal must be determined in favour of the subscriber if the subscriber shows that the act constituting the apparent infringement to which the report relates was not done by the subscriber, and the subscriber took reasonable steps to prevent other persons infringing copyright by means of the internet access service.

The powers of the person determining subscriber appeals must include power to secure so far as practicable that a subscriber is not prejudiced for the purposes of the copyright infringement  provisions by an act or omission in respect of which an appeal is determined in favour of the subscriber; to make an award of compensation to be paid by a copyright owner or internet service provider to a subscriber affected by such an act or omission; and where the appeal is determined in favour of the subscriber, to direct the copyright owner or internet service provider to reimburse the reasonable costs of the subscriber.

France

As the Ofcom report describes, France has implemented a regulated ‘three strikes’ scheme for tackling online copyright infringement.

The HADOPI law also enables copyright owners to have notices of infringement sent to allegedly infringing customers. There is no specific appeal from the correctness of each notice, but there are broad rights to dispute the information in notices before any sanction can be applied. Ofcom descibes the procedural safeguards in the French process as follows:

It is not possible to appeal subscriber notifications alleging infringement under the French ‘three strikes’ regime, as these are considered ‘reminders’ of the law, without legal effect in themselves. However, Hadopi (the government agency created to administer the Hadopi law) has chosen to accept contact from subscribers and we understand that around 10% of those who received first notifications have contacted them. Often this may often be with a view to securing more information about the allegation, rather than as a precursor to a claim of innocence.

There is a right to an administrative hearing before Hadopi, as part of Hadopi’s consideration of a case before deciding whether to forward it to the judiciary, who may decide to apply sanctions. It is a private hearing before three magistrates from the Hadopi Board. No conditions or payment for accessing the hearing are envisaged…

Based on its findings, Hadopi may choose not to pursue a case further, or to refer the file to the public prosecutor…

Two routes are available to the public prosecutor, where he considers there is sufficient evidence to prosecute:

A new, streamlined procedure before a single magistrate in the criminal courts, introduced as part of the Hadopi laws (where there is considered to be ‘no significant harm’)…

Under this procedure, the magistrate considers the file prepared by Hadopi. He has no powers to investigate further, and decides the case without a hearing…  The magistrate may dismiss the case or issue a criminal order imposing sanctions…

If the subscriber does not challenge the decision, it becomes final. If he wishes to challenge the decision, the public prosecutor may bring the case before the magistrate (sitting alone) for a hearing…

A standard procedure before a single magistrate in the criminal courts under general copyright law (used where there has been ’significant harm’, e.g. a high number of downloads or history of infringing)….

The magistrate may dismiss the case or [impose] sanctions…

Alternatively, if the prosecutor considers there is not sufficient evidence to prosecute, he may refer the file to the Police for criminal investigation.

The decision of the magistrate in the streamlined procedure (following a challenge) or of the criminal court in the standard procedure may both be appealed to the Court of Appeal.

New Zealand

The New Zealand Copyright (Infringing File Sharing) Amendment Act 2011 was enacted into law on 18 April 2011 and is due to become in force on 1 September 2011. The Act provides “copyright owners with a fast-track civil law alternative to existing remedies under general copyright law in order to enforce their rights against infringing file sharing by internet account holders.”

The New Zealand process was summarized by Ofcom as follows:

The 2011 Act provides for a three notification process, with the possibility of sanctions in the form of a fine or Internet suspension. The latter remedy requires secondary legislation in order to enter into force. All notifications may be challenged and sanctions may be appealed.

When a copyright owner provides an ‘internet protocol address provider’ (IPAP)  with information identifying an IP address at which copyright infringement is alleged to have occurred as a result of file sharing, the IPAP must match the IP address and send an ‘infringement notice’ to the subscriber. The subscriber can challenge the notification by contacting the IPAP, which forwards the challenge to the rights holder for consideration.

The rights holder responds to a challenge via the IPAP. A challenge is deemed to be accepted if it has not been rejected by the rights holder within 28 days from the date of the notice. In this case, the notice is cancelled and treated as if it had not been issued, unless the infringement subject to challenge did not itself trigger a notice, in which case the notice remains valid but the infringement is treated as if it were not included.

If the rights holder rejects the challenge, the subscriber may raise it again in any enforcement proceedings…

The Act provides for a fast-track system of enforcement, to sit alongside existing copyright enforcement provisions. Once a subscriber has been issued with a third notification, the rights holder may seek an order from the Copyright Tribunal for a sum of up to $15,000 (c. £7,000) and/or an order from a District Court for the IPAP to suspend the account holder’s internet account for up to six months (civil remedy). The provisions on suspension do not come into effect immediately but only following secondary legislation (‘Order in Council’) by the Governor General, specifying the date after which applications may be made to the District Court…

In order to take a complaint to the Tribunal, the loss must be quantified as under $15,000. Claims for over $15,000 may be pursued in the District Court under existing law.

Proceedings before the Copyright Tribunal will take place without a hearing, unless the account holder requests a hearing or the Tribunal considers that one should be held. It is presumed that each incidence of filesharing identified in an infringement notice constituted copyright infringement, the information in the notification is correct, and the notice was issued in accordance with the Act. A subscriber may submit evidence or give reasons why any of those presumptions do not apply to any of the identified infringements. It is then up to the rights holder to satisfy the Tribunal that the relevant presumptions are correct.

Appeals of the decisions of the Copyright Tribunal and the District Court are to the High Court.

As can be seen, all three of the legislated graduated response systems provide for extensive procedural protection to ensure that sanctions are only able to be imposed after consecutive notices are sent to alleged file sharers and such notices are not effective to prevent repeat infringements. Further, these protections also provide one or more appeals to independent entities to ensure that sanctions are only imposed on those responsible for online file sharing.

The UK, France, and New Zealand graduated response processes all involve legislative solutions to online file sharing. In other countries, graduated response systems have been implemented voluntarily by ISPs under agreements with copyright holders. An example is the Irish ISP Eircom which voluntarily implemented a graduated response process.

In the US, leading ISPs reached agreements with rights holders in July 2011 to implement a new a common framework for “Copyright Alerts”. The new Copyright Alert System provides a series of early alerts — up to six — in electronic form, notifying the subscriber that his or her account may have been misused for online content theft of film, TV shows or music. It will also put in place a system of “mitigation measures” intended to stop online content theft on those accounts that appear persistently to fail to respond to repeated Copyright Alerts. The system will also give subscribers the opportunity for an independent review to determine whether a consumer’s online activity in question is lawful or if their account was identified in error. Termination of a subscriber’s account is not part of this agreement. Further, under the Copyright Alert System, ISPs will not provide their subscribers’ names to rights’ holders under this agreement.

Canada’s Bills C-60, C-61 and C-32 would have implemented a less effective “notice and notice” system. Unlike any of the processes set out above, this process did not build in any deterrent for those repeatedly found to engage in online copyright infringement.

The UK Government also simultaneously published a series of  other reports including: Next steps for implementation of the Digital Economy Act, “Site blocking” to reduce online copyright infringement, Draft-Sharing-of-Costs statutory-instrument, Impact Assessment for the Sharing of Costs Statutory Instrument, Digital Economy Act Appeals Process: Options for reducing costs, International Strategy, and IP Crime Strategy.

The Government response makes it clear that intellectual property is of fundamental importance to economic growth, and that maximising its contribution relies on both enabling use of intellectual property and protecting it. The Government endorsed the Review’s view that it must  “not put our hugely important creative industries – or  any other IP-led business sector – at risk by what we do.  Managing that risk includes not only responding effectively to the challenges posed by technology, such as issues around enforcement of IP rights, but also seizing the opportunities for  growth that technology opens up.”

Several important plans are to:

• Bring forward proposals for an orphan works scheme that allows for both commercial and cultural uses of orphan works, subject to satisfactory safeguards for the interests of both owners of ‘orphan rights’ and rights holders who could suffer from unfair competition from an orphan works scheme.
• Bring forward proposals for extended collective licensing to benefit sectors that choose to adopt it, and look to maximise the benefits it could bring to smaller creative firms and individual creators in particular.
• Create “a limited private copying exception”; to widen the exception for noncommercial research, which should also cover both text- and data-mining to the extent permissible under EU law; to widen the exception for library archiving; and to introduce an exception for parody. These will be implemented “in ways that do not prejudice the provision of appropriate incentives for creation of works through the copyright system”.  No private copying levies are contemplated.

Following the successful defence of the Digital Economy Act provisions in judicial review, the Government is moving forward with the DEA initial obligations including plans to move ahead with the DEA notification system.

The Government decided not to bring forward regulations on site blocking under the DEA, at this time. Contrary to what has been widely reported, Ofcom did not rule out site blocking in the future and the Government stated it was “keen to explore the issues raised by Ofcom’s report and will be doing more work on what measures can be pursued to tackle online copyright infringement.”

Ofcom’s report concluded that blocking of infringing sites could potentially play a role in tackling online copyright infringement, but that the approach set out in the DEA was unlikely to be effective because the slow speed that would be expected from a full court process would provide site operators with the opportunity to change the location of the site long before any injunction could come into force. The Government noted that Section 17 and 18 of the DEA would not be faster than what is already available under section 97A of the UK CDPA. This process, which is required under Article 8(3) of the EU Copyright Directive, was just successfully used to obtain an order against BT to block access to the Newzbin file sharing web site in Twentieth Century Fox Film Corp & Ors v British Telecommunications Plc [2011] EWHC 1981 (Ch) (28 July 2011) (summarized here).

The Government canvassed additional measures that could be used to block access to content besides those contemplated by sections 17 and 18 of the DEA. It concluded that additional effective measures include those available under section 97A of the UK CDPA, notice and takedown, domain seizures, squeezing site revenues, and search engine delisting.

According to the Ofcom report: Site blocking” to reduce online copyright infringement, the following additional processes are available:

Blocking injunctions: section 97A of the Copyright Designs and Patents Act 1988 (CDPA) gives the Court power to grant an injunction against a service provider “where that service provider has actual knowledge of another person using their service to infringe copyright.” Such an injunction exists in addition to the power of the Court to grant an injunction in the context of an action for breach of copyright by a particular person.

Notice and take-down: where content is hosted in the UK copyright owners may ask the hosting service provider to take down the content at source. Where this happens the service provider can review the material and take its own view as to whether the content is infringing. YouTube offers a particularly interesting model of this. Where copyright owners identify content which they believe to be infringing, YouTube offers them tools to allow for the content to be taken down or actually monetised. The copyright owner can take a share of the advertising revenue on the page or use the page to promote the copyright owner’s own videos on YouTube. If the service provider chooses to remove the content then the party who has posted the content will typically be informed and given the opportunity to challenge the decision, with access to the content being re-instated if the service provider is persuaded that it is not infringing.

Under US law, there is a formal legal process for such a scheme, operated under the Digital Millennium Copyright Act (DMCA). Service providers are provided with a safe-harbour, which grants them immunity from prosecution (under secondary infringement rules) where they operate within a specific framework in considering requests from copyright owners to block access to sites or to remove content where they are hosting it….

A notice and take-down scheme could provide a valuable complement to a technical blocking measure, essentially offering the service provider the opportunity to remove the content in question prior to a formal block being put in place. The opportunity for the site operator to remove infringing content ahead of a block being implemented could be helpful where the blocking technique carried a risk of over blocking. In this context, it is worth noting that the Italian communications regulator (AGCOM) is consulting on proposals for regulated notice and take-down scheme under which the regulator would have powers to require service providers to remove infringing content. That the removal of content was at the request of the regulator would, we assume, protect the service provider from liability.

De-listing from search index: some search engines, most notably Google, will de-list particular sites following the submission of evidence from a copyright owner that the site is infringing copyright. Application to de-list is submitted to Google via post or fax. Google will attempt to contact the site hosting the alleged infringing content and provide them with an opportunity to engage in the process before Google reaches its decision. De-listing can be an effective measure in so far as it makes it more difficult for users to find unlawful sites and it makes it easier to locate lawful alternatives, as they will appear higher on the search rankings than would otherwise be the case.

De-listing of infringing sites could increase the effectiveness of a blocking scheme. Whilst the operator of a site which has been blocked can move the site to an alternative IP address, URL or domain, if it cannot secure a listing for the new location on search engines then it will prove harder for users to find it and for the operator to effectively re-build its business.

Squeeze revenues: infringing sites can often appear legitimate to users and some are alleged to be successful at generating significant revenues. Some infringing sites charge a subscription fee, carry banner advertising for legitimate brands and often look more attractive to consumers than their lawful alternatives. It can be difficult for a consumer to know whether the site is indeed infringing. Many brand owners are unaware that their adverts are appearing on such sites until it is brought to their attention by copyright owners. Copyright owners have reported some success in persuading those brands to instruct their advertising agencies to withdraw ads from such sites. Similarly, credit card companies are reported by copyright owners as having been put under pressure to withdraw payment platform services from such sites. In addition to helping make the service appear less legitimate, the removal of payment platform services and advertising may make such sites less attractive to operate given the costs of bandwidth and storage required for operation, as well as the inconvenience caused by the disruption and from having to secure alternative payment platform services.

Domain seizures: a recent development in the U.S. has been the seizure of websites which were allegedly illegally streaming live content. In February, the U.S. Immigration and Customs and Enforcement (ICE) department executed a federal Court order in the Southern District of New York, seizing 10 websites. The websites were streaming coverage of National Football League, National Basketball Association and National Hockey League events. ICE has said publicly that further seizures will occur. Visitors to those sites were redirected to a banner advising that the domain name had been seized by the New York office of ICE because of criminal copyright violations. There may be a greater attraction to domain seizures in the US than would be the case in the UK, given that there are more significant domain registries with the US jurisdiction. We believe that such a measure, if implemented in the UK, would only be capable of a limited effect, given that it would only affect domains using “.uk” country code top-level domains. Site operators can respond to a seizure by registering their site in a different country. Whilst this is an inconvenience, it is not a significant barrier to the operation of unlawful sites. The approach could be made more effective through improved international cooperation amongst enforcement agencies, limiting the number of countries to which those subject to seizure orders can switch.

The Ofcom report concluded:

We believe that the measures outlined above could potentially play a role in support of a site blocking scheme, complementing the more technical approaches and, in some cases, helping to compensate for weaknesses inherent in the blocking techniques. A bill has been introduced in the US which would see many of these measures adopted to help the enforcement agencies and copyright owners to tackle infringing web sites based outside of the US. It is too early to predict the outcome for that proposal, but we believe there is value in considering further how such measures could be deployed to enhance the effectiveness of site blocking within the UK.

He pointed out that “a renewed vision is required for a digital economy”, that the “digital economy will be a defining part of our economy”, that technology “is changing our world” and that we must “evolve if we hope to prosper”.

Mr. Garneau is clearly right. Technology is changing our world and we either have to adapt or suffer the consequences. Just look at the changes the Internet, search engines, smart phones, iPods, and the myriad other innovative technologies have brought to every segment of our lives. 

Mr Garneau is also right that we have a lot to learn from what our trading partners have been doing. The UK with its Digital Britain agenda,is miles ahead of us in identifying the issues, researching the options, and developing and implementing policy proposals. We cannot sit idly by while these countries develop the technical and legal infrastructure to address the complex challenges of the 21^st century.

Last month Industry Minister Tony Clement also noted in an interview with Canwest that ‘”We have to have a strategy for the digital economy in Canada…for doing more things online.’” He also announced in a speech to ITAC on February 2 that beginning this spring,  he intends to launch the next phase in building out Canada’s strategy for the digital economy. He says it will be “A made-in-Canada strategy. One which will stand the test of time and carry Canada forward — not just next year, but for the decade to come.”

In his ITAC speech, Minister Clement also noted that “Updating copyright law is important. In the past decade, digital technology has evolved dramatically, changing the way in which Canadians work, live and get involved both locally and globally. Copyright laws are critical to the digital economy in Canada. They give creators and consumers the tools they need to engage with confidence in the digital marketplace. Updated copyright laws will also help foster creativity, innovation and economic growth.”

But, why the long wait for the strategy? In his article Mr. Garneau asks  “where is the government on various issues including ‘on issues of net neutrality and intellectual property?”

In the IP area, there have been countless government promises for reform. Parliamentary subcommittees have recommended it. Canadian business has been clamouring for it. Yet we seem to be standing still while our EU and other neighbors are moving forward. We cannot slip farther behind in those areas that will give Canadians opportunities for self realization and prosperity.

Todays headlines highlighted Canada’s poor showings in productivity, a factor that is estimated to cost each Canadian 30k. We need a strategy that will foster innovation and creativity in Canada. A digital strategy, as Mr Garneau pointed out, has to be part of that.

Kudos to Mr Garneau for taking up this challenge.

With respect to broadband, he outlined that the government had two major broadband projects: a commitment that every home in the country should be able to obtain a 2 Mbit/s broadband service – and so be able to use the applications which most people are using broadband for today; and a next-generation fund to support national scale investment in much higher speed services.

With respect to new business models, he talked about the need for the content industries to come up with new business models – and what government can do to help. He mentioned the importance of rights holders developing new ways to make content available to people in formats that they want and at fair prices to reduce the incentive to break the law. He also mentioned the need to educate people about why creativity deserves to be fairly rewarded.

The Minister for Digital Britain also referred to the government’s £10 million investment in digital test beds to provide low-cost, low-risk opportunities for companies to experiment with ideas and find ways to monetise new online content. The goal of this project is to make progress on understanding how innovations like micropayment can help reduce piracy.

The Minister pointed out that new consumer services are emerging in the UK – like Sky Songs and Youtube’s partnership with Channel 4. The UK government wants services like these to thrive, just as Spotify did when Sweden introduced regulations similar to those the UK is putting in place.

As for copyright, the Minister highlighted the urgent need to enact and implement the Digital Economy Bill to address online infringement which is costing the creative industries hundreds of pounds each year. The Minister had this to say with respect to copyright:

“Nobody here needs any reminder from me about the importance of finding answers to the problem of online copyright infringement. Technological developments that have generated so many new markets, new platforms for content and exciting channels for creative expression have also overturned traditional business models. They’ve made content freely available to people who love what they’re getting but aren’t keen to pay for it.

Copyright infringement has been around for a long time. But in this digital age, it’s on an altogether different scale. And it is costing the creative industries hundreds of millions of pounds every year.

Government has to help in finding a solution. And it requires legislation.

We’ve introduced provisions in the Digital Economy Bill, being debated in the House of Lords at the moment, that will require internet service providers to write to those of their customers who are found by rights holders to be infringing copyright through peer to peer file sharing. Internet providers will also be required to make data available to rights holders, so they can pursue legal action against serious offenders. This approach will be backed by powers to impose technical penalties – like bandwidth capping or temporary account suspension – as a last resort.

It needs to be proportionate. And it needs to be underpinned by a clear and effective appeals mechanism. But the measures will achieve a big reduction in online infringement and – just as important – give rights holders space to develop new business models.

Cooperation from internet service providers is vital…

There’s real urgency here. We need the provisions in the Digital Economy Bill to make an impact quickly. That means putting a code of practice in place quickly. I hope interested parties will work with Ofcom while the Bill is still in Parliament so that the outline code can take shape. And the Bill also contains provisions to address infringement beyond the peer to peer file sharing which accounts for the bulk of the problem at the moment.”

The Minister concluded his speech by highlighting the need for cooperation between all stakeholders to make the Digital Britain initiative a success.

“There’s a long way to go with the Digital Britain programme. I have set out what we are doing in three key areas – broadband, copyright, new business models. And new challenges, as yet unforeseen, will emerge too, and we will have to resolve them.

But we are good at all this in Britain. People who have been denouncing each other should be talking together. What I would ask is that all of us work together in the period ahead, to make the most of the digital economy, and to make a reality of the ambitions that all of us share.”

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.[1] 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.[2] 

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.

The UK consultation proposal is very relevant for Canadians given the consultation and reform process we are engaged in. We could learn much from the UK process. Here are some thoughts.

Process considerations

The UK government has eschewed an approach which tries to cover all amendments in one Bill. Rather it has decided to move forward on multiple fronts to make as much progress as possible to deal with needed copyright reforms. The government recognized as part of its Digital Britain initiative the need to reduce online file sharing in order to give the copyright industries a stable predictable environment to grow digital business models. So, after consultations on that front, it tabled the Digital Economy Bill proposing a notice and notice system backed up by a process to implement a nuanced graduated response process if the government’s specific objectives of reducing online file sharing were not met. The government also recognized the need to modernise copyright exceptions to adapt them for the digital environment. Hence, the new consultation process.

The UK government also shows leadership by identifying specifically what it proposes to do and sets clear timetables for next steps. In regards to the copyright exceptions, its consultations will end on 31 March 2010 and draft legislation will be laid in Parliament with a view to its coming into force in October 2010.

The UK government expressly recognizes that all exceptions must be subject to the Berne/TRIPs Three Step Test. Accordingly, it has assessed each proposed exception against the requirements of the ‘three step test’. An analysis is provided at the end of each relevant proposal.  The need for compliance with the Three Step Test is described in the consultation document as follows:

“The law of copyright in the UK is governed by the Copyright Designs and Patents Act 1988, (CDPA). It must comply with various international treaties and European Directives13 and must satisfy the “three step test” found within them.

The test has been the subject of a large amount of academic comment but there is very little decided case law. The first step requires an exemption to apply in clearly defined circumstances. The second step requires the normal exploitation of the right to be judged for each exclusive right individually. The underlying aim of the test is to ensure that an excepted use should not enter into competition with the original work. In making this assessment, the potential as well as actual effect of the exception on the market would need to be considered.

The third step involves a balancing exercise between the general interests in protecting the rights holder’s exclusive rights in a copyright work and the public interest in the exploitation of the work. The rights holder’s interests may be but are not necessarily limited to its economic interests. It has been suggested that this step essentially takes on the focal point of the three step test.”

The UK government also expressly acknowledges the balancing  considerations involved in the reform process.

“In seeking to update the copyright framework to try and deliver benefits, we are mindful of the need to retain appropriate rewards for creators as an incentive for further investment in creativity and to ensure the continued growth and success of the creative industries. We have also taken into account a variety of other factors, such as the public interest, the overall benefits to society, economic impact, potentially unintended consequences, and the constraints imposed by International and European legislation by which the UK is bound.”

The proposed exceptions

Educations exceptions

The government proposes to extend sections 35 and 36 of the UK copyright legislation to enable distance learning and the use of interactive whiteboards and to permit access to a broader range of works. In particular, it plans to extend the educational exceptions to permit certain broadcasts and study material (for example handouts of excerpts from copyright works) to be transmitted outside the institutional campus for the purposes of distance learning but only via secure networks. It also plans to extend the exception relating to small excerpts so that it covers film and sound recordings , but this will not cover artistic works. The exceptions will apply only to the extent that licensing schemes are not in place.

Format shifting

The government does not plan to introduce any new format exceptions at this time. It believes, rather than acting unilaterally, that an EU wide harmonized approach to address enforcing rights over personal, non-commercial use of works is the better approach. Accordingly, it plans to raise this at the EU level. According to the government:

“The fundamental issue, as the strategy notes, is that enforcing rights over personal, non-commercial use of works appears disproportionately difficult in the digital age. A case can therefore be made for an exception much broader than simply format-shifting, potentially covering not just the reproduction of legitimately-purchased works but also some degree of sharing of those reproductions in derivative works and/or with family and friends. Such an exception could impact on revenues for rights holders; an element of fair compensation for any loss would be required. Any such exception would have to be developed at the European level. “

Research and private study

The government proposes extending the current research and private study exception under section 29 (fair dealing) to allow the copying of sound recordings, films and broadcasts, but only if the individual is a member of an educational establishment and copying is for the purposes of a course of private study or for research at that establishment. It also proposes to enable librarians to copy sound recordings and films on behalf of individuals providing certain criteria are met.

Libraries and archives

The government proposes to extend the current exception to allow libraries, archives, museums and galleries to copy for preservation purposes films, sound recordings and certain artistic works not already provided for, to enable the transfer of works to different formats and to enable more than one preservation copy to be made; to ensure that legal deposit libraries are put in the same position as other libraries when it comes to copying for preservation purposes.

Parody

The government does not believe that there is sufficient justification to introduce a new exception for parody in the UK now. Overall, the information supplied in response to the first stage of the consultation was not sufficient to persuade it that the advantages of a new parody exception were sufficient to override the disadvantages to the creators and owners of the underlying work.

Earlier this month the government published © the way ahead: A Copyright Strategy for the Digital Age. The report focused on the need to keep copyright consistent with public expectations and explored the desirability of making access to and use of works easier for consumers. It also recommended making orphan works easier to access and suggested extended collective licensing as a means of facilitating making works available to the public.

The Digital Economy Bill implements several copyright initiatives proposed previously by the UK government. A thorough description of the proposed process is in the Explanatory Notes, which accompanied the Bill.

The Bill gives the Secretary of State power to confer extended powers on collecting societies to grant licences over works of non-members, and to make other provision for the granting of licences in respect of orphan works. The Bill also follows through on the Government’s commitment to stem online file sharing through a notice and notice system backed up by a fair and balanced graduated response system should notice and notice prove ineffective.

Anti- copyright advocates often misleadingly characterize graduated response systems as a “three strikes your out” process and attempt to discredit them by using fear mongering tactics telling the public that under these systems a family’s internet connection can be terminated for one year based solely on three unproven allegations of copyright infringement and that their personal information will be indiscriminately shared between ISPs to ensure this happens . See, Fear Mongering and Misinformation Used to Slag ACTA

The graduated response process being enacted by our trading partner such as France, New Zealand and the UK are nothing of the sort. The actual proposed provisions of the Digital Economy Bill show the extent to which the UK government has gone to ensure that if the process is implemented, it will be a completely fair process to all involved.

As explained in the Explanatory Notes, the Bill would amend the Communications Act 2003 (“the 2003 Act”) to impose obligations on ISPs to notify their subscribers if the internet protocol (“IP”) addresses associated with them are reported by copyright owners as being used to infringe copyright; and keep track of the number of reports about each subscriber, and compile, on an anonymous basis, a list of some or all of those who are reported on. After obtaining a court order to obtain personal details, copyright owners will be able to take action against those included in the list.

In case these notice and notice obligations prove insufficient to reduce significantly the level of online infringement of copyright, the provisions also grant the Secretary of State a power to impose further obligations (“technical obligations”) on ISPs. These would be imposed on the basis of reports from OFCOM or any other relevant considerations, and would require ISPs to take measures to limit internet access to certain subscribers. The intention is that technical measures would be used against serious repeat infringers only. Technical measures would be likely to include bandwidth capping or shaping that would make it difficult for subscribers to continue illegal file-sharing, but other measures may also be considered. If appropriate, temporary suspension of broadband connections could be considered.

To safeguard the interests of consumers, the provisions also require two appeal processes to be set up. The appeal would be to a person independent of OFCOM, with a further right of appeal to an independent tribunal (called the First-tier Tribunal). Further, to obtain a remedy, the intention is that copyright owners would be held to the same standards of evidence of copyright infringement as in a copyright infringement action.

The provisions also set out how the costs of operating such a system may be shared. Funding from cost apportionment would enable an underpinning code to be developed by interested parties.

The Explanatory Notes illustrate how the provisions might work in practice, possible processes of notification and court action:

• Copyright owners identify cases of infringement and send details including IP addresses to ISPs;

• The ISPs verify that the evidence received meets the required standard, and link the infringement to subscriber accounts;

• The ISPs send letters to subscribers identified as apparently infringing copyright. They keep track of how often each subscriber is identified;

• If asked to do so by a relevant copyright owner, ISPs supply a serious infringers list showing, for each subscriber who has been identified repeatedly by the copyright owner, which of the copyright owner’s reports relate to that subscriber. The list does not reveal any subscriber’s identity;

• Copyright owners use the serious infringers list as the basis for a large scale “Norwich Pharmacal” court order to obtain the names and addresses of some or all of those on the list. At no point are individuals’ names or addresses passed from the ISP to a copyright owner without a court order;

• Copyright owners send “final warning” letters direct to infringers asking them to stop online copyright infringement and giving them a clear warning of likely court action if the warning is ignored; and

• Copyright owners take court action against those who ignore the final warning.

The “notice and notice” process sets out an obligation for ISPs to notify subscribers of copyright infringement reports (“CIRs”) received about them from copyright owners. To help ensure that the subscriber is made aware that their account appears to have been used to breach copyright, the Bill imposes an initial obligation on the ISP to notify the subscriber if the ISP receives a CIR from a copyright owner. The notification from the ISP must inform the subscriber that the account appears to have been used to infringe copyright, and it must provide evidence of the apparent infringement, direct the consumer towards legal sources of content, and provide other advice such as that information about the apparent infringement may be kept and disclosed to the copyright owner in certain circumstances and that further apparent infringements using the subscriber’s account may result in additional notifications.

ISPs will have to keep a record of the number of CIRs linked to each subscriber along with a record of which copyright owner sent the report. An ISP may be required to provide a copyright owner with relevant parts of those records on request (“copyright infringement lists”), but in an anonymised form so as to ensure compliance with data protection legislation. The intention is for the code to set out a threshold number of CIRs, for example 50, which means that a subscriber will be considered a serious repeat infringer whose alleged infringements must be covered by any copyright infringement lists that the ISP provides to the relevant copyright owner.

The lists would be made available to copyright owners on request in an anonymised form. For example, while a list might (for example) identify subscriber 936 as being linked to the most CIRs, it would not include any personal information about subscriber 936. In order to get this personal data, the copyright owner would need a court order. However, the list would allow the copyright owner to identify subscriber 936 as someone against whom legal action may be appropriate.

The Bill would also enable the Secretary of State to make provision by order to amend the UK Copyright, Designs, Patents Act, for the purpose of preventing or reducing on-line copyright infringement if it appears to the Secretary of State appropriate to do so having regard to technological developments that have occurred or are likely to occur. Illustrative examples of the possible ways in which this power could be used include: adapting the legal process  to allow rights holders to take more effective action more quickly against websites hosting or sharing material in breach of copyright; creating a fast track process; or imposing a duty on a body to report on the prevalence of new or emerging types of online infringement.

The UK Digital Economy Bill is certainly worthy of close consideration by the Canadian Government as a possible model for implementing a much needed graduated response process in Canada. The processes in the Bill also demonstrate just how misleading anti-copyright advocates are when they summarily dismiss graduated response systems as being capricious and heavy handed “three strikes and your out” processes.

Much like the Canadian Government, the UK Government wants a copyright system “that works as well as it can for everyone in the UK, supporting investment and sustaining jobs, as well as underpinning our cultural life, and supporting consumers to get the best from the digital age.”

The report sets out what the UK Government plans to do both domestically and through the EU. The proposed measures reflect the interests of all stakeholders:

• for creators of copyright works: to support fair treatment through new model contracts and clauses and fair returns for use of their work by improving education about and enforcement of rights;

• for rights holders: to help secure a viable future by encouraging the development of new business models, modernising the licensing process and maintaining support for education about and enforcement of rights (including tackling peer-to-peer filesharing);

• for consumers: to allow them to benefit from the digital age by seeking to legitimise non-commercial use of legitimately purchased copyright works and improving access to ‘orphan works’ such as out-of print books;

• for educators and researchers: to support them by improving access to works, resolving issues around copyright and contract and ensuring exceptions to copyright are right for the digital age; and

• for businesses and other users: to work towards a simpler system by looking at the scope to simplify copyright, improving the copyright licensing process and encouraging the development of new business models.

He makes some observations relevant to Canadian copyright reform about the importance of the creative industries and the need to create a proper legal framework to ensure they thrive. He also explains that the graduated response regime the UK is implementing is a carefully nuanced and procedurally fair process.

Why the creative industries matter

“I’m a big defender of an economy based on making things, which is why I often speak about manufacturing. But in terms of added value in a global economy the difference between making a car or a plane and making a TV show or a video game is largely a meaningless one. Especially when you consider how integral and central to the manufacturing process innovative design is.”

The digitalisation of creative industry

“But of course the creative industries are undergoing an immense shift, driven above all by the internet and by digital technology. We now have greater unmediated access to cultural goods than ever before, and in formats that make them easier to appropriate and share than ever before. A world where creative content is conceived, published, distributed, advertised and consumed digitally is revolutionary for the users of cultural goods, and revolutionary for the people who produce them.”

“This means we are going to have to work even harder to make sure the environment for creative industry here is right. At a very basic level that means making sure we have the digital infrastructure in Britain – which is one of the key questions that the Government’s Digital Britain report addressed.
But the big challenge that the digital economy poses for the creative industries, of course, concerns content producers’ control over their ideas and goods. The creative industries are literally built on the idea that it is legitimate to protect the value of creativity through copyright and intellectual property rights. If they don’t retain that, frankly they don’t have a viable business model left.

I was shocked to learn that only one of every 20 tracks downloaded in the UK is downloaded legally. One in twenty. You just can’t have sustainable creative industries under the pressure of this kind of theft – and that’s what it is. So I want to be absolutely clear. The British Government’s view is that taking people’s work without due payment is wrong and that, as an economy based on creativity, we cannot sit back and do nothing as this happens.

The trouble is that too many users of digitised cultural goods simply don’t see it that way. When 15 year old intern Matthew Robson reported back to his bosses at Morgan Stanley in the summer on the attitudes of his peers to digital content his key conclusion was pretty much: they want what they want and they don’t really want to pay for it. That was the view of a 15 year old intern at Morgan Stanley. And, of course, on the internet it’s incredibly easy to get just that. The important cultural and ethical sense that it is an issue of right and wrong is eroding before our eyes. This is not just morally unacceptable: it’s also commercially unsustainable for artists, for investors and producers alike.”

A new business model

“Now, it seems self-evident to me that trying to evolve new business models against these kind of attitudes is very hard, and I take my hat off to those who have tried. Further investment in new business models is important. But the Government also has a responsibility to act. That is why we have decided to intervene and legislate to tackle the problem of file-sharing, and it is why other countries, including France and the United States, are doing the same.

What we will be putting before Parliament is a proportionate measure that will give people ample awareness and opportunity to stop breaking the rules. It will be clear to them that they have been detected, that they are breaking the law and that they risk prosecution. If necessary we have also made it clear that we will go further and make technical measures available, including account suspension. In this case, there will be a proper route of appeal. But it must become clear that the days of consequence-free widespread online infringement are over.

When I reopened this issue back in the summer there was a lot of contentious debate, not surprisingly. But, let me be clear on this point: technical measures will be a last resort and I have no expectation of mass suspensions resulting. If we reach the point of suspension for an individual, they will be informed in advance – having previously received two notifications – and will have the opportunity to appeal. But the threat for persistent individuals is, and has to be, real, or no effective deterrent to breaking the law will be in place.”

“The bottom line for the Government is that the creative industries are and must remain central to a balanced, knowledge economy. They are one of the keys to the recovery now underway and our whole economic future. There is no economy on earth in which the creative industries play such an important part in overall growth and job creation, and that is an immense asset to the UK that we are determined to preserve and strengthen….

I hope that our approach and the stable, predictable framework being put in place will allow good commercial decisions to be taken for the benefit of everyone including consumers, who we are all here to serve.”