The abstract of the article states the following:

“Legal context: The prohibitively high cost of civil litigation is inefficient against millions of online infringers; it is virtually impossible to stop online infringement. The establishment and maintenance of a social norm which makes people willing to conform to pro-copyright norms independent of any consideration of legal incentives is indispensable in the fight against online infringers. It requires a credible enforcement mechanism to tell people that online infringement will not be socially acceptable and to increase copyright compliance; but the efficiency of such an enforcement mechanism is a function of transaction costs of copyright enforcement. The debate on the three strikes law should be viewed from its potential impact on our social and economic well being. I suggest that the infringing subscribers, not copyright owners or OSPs, should bear the cost of enforcement. Reducing transaction costs of enforcement is the key factor in designing any three strikes law if there is any reasonable chance that it will work.

Key points: To find a least cost solution to online infringement requires a good understanding of the relationship between the principles of externality and of ‘least cost avoider’. The concept borrows from Tort Law.

Practical significance: The reduction of transaction costs of copyright enforcement in the networked environment increases the credibility of the copyright system, if any design of copyright rule such as three strikes law takes the transaction costs of enforcing copyright in the networked environment and the principle of least cost avoider into consideration, it will change the way we formulate copyright policy.”

The article is one of several recent ones to argue that graduated response systems can be justified on economic as well as other grounds. Other articles include: Prof. Bomsel Decreasing Copyright Enforcement Costs: The Scope of a Graduated Response, Prof. Bridy, Graduated Response and the Turn to Private Ordering in Online Copyright Enforcement, Prof. Strowel, Internet Piracy as a Wake-up Call for Copyright Law Makers—Is the ‘‘Graduated Response’’ a Good Reply?, Barry Sookman and Dan Glover Graduated response and copyright: an idea that is right for the times.

The background to the case involves a settlement agreement between Eircom and various rights holders that requires Eircom to implement an agreed to protocol to reduce illegal file sharing by Eircom’s customers. It involves collection of IP addresses by rights holders that are associated with online infringements. The IP addresses will be sent to Eircom which in turn will send out a series of notices designed to educate users about unauthorized file sharing and give them ample opportunities to stop or face possible sanctions including account disconnection. This remedy can only be applied following three notices and a review of individual circumstances and mitigating factors by Eircom.

The copyright holders had pressed for the settlement because of the significant losses being suffered due to unauthorized file sharing. The judge recognized this, finding that remuneration to rights holders is “shrinking by reason copyright theft over the internet” and that the interests of creators is being “utterly disregarded” by this activity.

The judge pointed out that the “attraction of free, but illegal, downloading of the latest songs and videos made the sale of internet access attractive.” Everyone from users to ISPs were free riding from unauthorized file sharing resulting in losses to artists and the creative community.

The Data Protection Commissioner had raised several questions about the settlement. The first two were the following:

“1. Do data comprising IP addresses, in the hands of EMI or its agent(s), and taking account of the purpose for which they are collected and their intended provision to Eircom, constitute “personal data” for the purposes of the Data Protection Acts, 1988-2003, thereby requiring that the collection of such IP addresses by EMI or its agents must comply with the specific requirements of each of section 2, 2A|, 2B, 2C and 2D of the Data Protection Act, 1988 as amended?

2. Having regard to section 2A(1) of the Data Protection Act, 1988 as amended, and assuming for current purposes that the processing by Eircom of “personal data” in the context of the third of three steps envisaged by the graduated response scheme proposed under the terms of this settlement, (i.e. the termination of an internet user’s subscription) is “necessary for the purposes of the legitimate interests pursued by [Eircom]”, does much processing represent “unwarranted [processing] by reasons of prejudice to the fundamental rights and freedoms or legitimate interests of the data subject”?

Is an IP address “personal data”

This question was easily answered in the negative by the trial judge. The Data Protection Act 1988 defines “personal data” as “Data relating to a living individual who is or can be identified either from the data or from the data in conjunction with other information that is in, or is likely to come to into, the possession of the data controller.” The IP addresses collected by rights holders did not personally identify any living person who is infringing their copyright. According the court:

“Nothing in these provisions changes one basic fact. Neither DetectNet, or any similar service of detection, nor any of the plaintiffs whose copyright material is being infringed would ever know through this process that the infringer is a particular person living in a particular place in Ireland. What they do know is that a particular IP address has been involved in the downloading. An IP address is the number given to a computer from an internet service provider when it receives internet access. The IP number electronically identifies the user of the internet. Banks of numbers for IP addresses are produced by an international organisation and these, in turn, are provided to internet service providers. One can find out by looking at the IP number, I understand, who the internet service provider is. What internet service provider is given what bank of thousands or millions of IP numbers is not kept a secret anywhere. Since each internet service provider will have, in turn, many thousands of customers, one is not moving much closer to finding out the identity of an internet abuser by knowing the copyright infringing IP address was assigned to that company. That number will probably give you no more than an indication of the domicile of the computer. Further, I am convinced, on the basis of the affidavit evidence before me, that the plaintiffs have no interest at all in using this process to find out who the copyright infringers are. Rather, what they are interested in having the protocol work so that the plague of copyright infringement may be undermined…

I conclude, that none of the plaintiffs have any interest in personally identifying any living person who is infringing their copyright by means of the settlement and protocol. I do not regard it as at all likely that they will attempt in any way to use the IP address as supplied to them by DetectNet of those engaged in illegal downloading in order to find out their names and addresses. Further, since, on the affidavit evidence before me, the plaintiffs had previously engaged in expensive litigation against Eircom in order to find out who they are, there seems no legal avenue open to them to get that information apart from an application for the names and addresses of the copyright thieves to the internet service provider. It is proved to me to be close to impossible that they could have recovered them by any easier or less pricey means. Nor do any of the plaintiffs have any intention of engaging in any illegal activity. Rather, the entire purpose of this litigation is to uphold the law. The first question is therefore answered no.”

Can a graduated response system that involves account disconnection be justified?

The second question before the court asked, essentially, whether the graduated response protocol which included the possible termination of an internet user’s subscription, is necessary for legitimate purposes and whether it represents unwarranted processing of personal data by reason of prejudice to the fundamental rights and freedoms or legitimate interests of users, the data subjects. The court resoundingly found that the protocol was necessary and justifiable.

In giving reasons, the court made some important holdings and observations which are canvassed below.

The Judge started his judgment by emphasizing the importance of copyright. He stated:

“Copyright is a universal entitlement to be identified with and to sell, and therefore to enjoy, the fruits of creative work. It applies to everyone who manages to produce anything copyrightable from a song, to a telephone directory, to a symphony, to a film. Were copyright not to exist, then the efforts of an artist could be both stolen and passed off as the talent of another. Were the artist not entitled to exploit her or his creation by preventing others from copying it without permission, usually for a fee, then the fruits of moments of inspiration worked out through weeks of endeavour and representing, sometimes, the distillation of some fundamental experience of life would bring no reward, perhaps not even applause. Even if an artist won acclaim, it alone would not keep body and soul together. Examples of what can occur where copyright protection is absent used to be found as notorious examples of unfairness in history rather than as a contemporary situation that has developed because of the abuse of the internet. When Jan Sibelius, a Finn, penned his Valse Triste, Finland was part of the Russian Empire, not a party to the copyright convention, and the great composer received nothing for what was then his most popular work. The three early ballets of Igor Stravinsky, a Russian, suffered the same fate; though on moving to the West, the composer re-orchestrated them and republished them gaining copyright but only in that form. No reasonable person doubts the injustice of that situation. The law does not doubt it either.”

Justice Charleton also explicitly recognized the right to be identified with and to reasonably exploit one’s own original creative endeavour as a human right protected under the Constitution of Ireland. On this he said:

“In dealing with this aspect of data protection entitlement, I feel I must return, for a moment, to some basic principles of law. There is fundamental right to copyright in Irish Law. This has existed as part of Irish legal tradition since the time of Saint Colmcille. He is often quoted for his aphorism: le gach bó a buinín agus le gach leabhar a chóip (to each cow its calf and to every book its copy). The right to be identified with and to reasonably exploit one’s own original creative endeavour I regard as a human right. Apart from legal tradition, the rights now enshrined in the Copyright and Related Rights Act, 2000 were, under their previous legislative incarnation, identified in Phonographic Performance Ireland Limited v. Coady, [1994] I.R. 504 by Keane J. at 511 has having a pre-legislative origin and super-legislative effectiveness as part of the unenumerated fundamental rights under the Constitution:

‘The right of the creator of a literary, dramatic, musical or artistic work not to have his or her creations stolen or plagiarised is a right of private property within the meaning of article 40.3.2 and article 43.1 of the Constitution of Ireland, 1937 as is the similar right of a person who has employed his or her technical skills and/or capital in the sound recording of a musical work. As such, they can hardly be abolished in their entirety, although it was doubtless within the competence of the Oireachtas to regulate their exercise in the interests of the common good. In addition and even in the absence of any statutory machinery, it is the duty of the organs of the State, including the courts to ensure, as best they may, that these rights are protected from unjust attack and, in the case of injustice done, vindicated.’”

The judge then pointed out that the Internet is not a special case where the law does not apply. The Internet has not changed fundamental values and rules. As the judge pointed out: “There is nothing in the criminal or civil law which legalises that which is otherwise illegal simply because the transaction takes place over the internet. Child pornography, for instance, remains child pornography whether sent by post or digitally transmitted.”

Further, the judge observed that although the Internet has many postive attributes it also has a dark side. This includes illegal online file sharing which is subject to the law notwithstanding the free culture attitude of entitlement among online file sharers:

“When the internet gained wide currency in the 1990s many of its adages began to believe that a new form of reality had been created. Some felt that it should be subject to no rules since, as it was not based in a particular country, but as its name implies is a world-wide web of communication, unlike the previous means of communication through the post, by telephone, through television or through films, it seemed to be impossible to subject to local regulation. That is not so. Nor should it be. In common with other aspects of life, the internet has a positive and dark side. On the positive side, its aids free communication; it opens up avenues of knowledge so that it has become a centre of learning in itself; it furthers public debate; and has established the swiftest and most far reaching form of communication that humanity has known. It is, on the other hand, also thickly populated by fraudsters, pornographers of the worst kind and cranks.

The internet is only a means of communication. It has not rewritten the legal rules of each nation through which it passes. It is not an amorphous extraterrestrial body with an entitlement to norms that run counter to the fundamental principles of human rights. Since the early days of the internet, and increasingly as time has gone on, copyright material has been placed on world wide web by those with no entitlement to share it. There, it is downloaded by those who would normally have expected to pay for it. Among younger people, so much has the habit grown up of downloading copyright material from the internet that a claim of entitlement seems to have arisen to have what is not theirs for free.”

On the specific issue of whether the graduated response protocol was justified, the judge recognized that disconnection of an internet account was a serious sanction. He noted that “Some would argue that it is an imposition on human freedom.” He rejected this assertion pointing out that “There is no freedom, however, to break the law.” Then, after adverting to the right to obtain protection for “one’s own original creative endeavour” “as a human right” under the Irish Constitution, he held that the graduated response protocol was fully justified to vindicate this important human right. According the the court:

“The courts under the Constitution are obliged to supply, even in the absence of legislative intervention, appropriate remedies for the undermining of rights within the scheme of fundamental law that the Constitution represents. As has often been said, the powers of the courts in that regard are as ample as the Constitution requires. I am therefore obliged by Constitutional imperative to protect, as best I can, the rights of copyright owners from unjust attack or, where that sort of attack has taken place, to vindicate their rights through an appropriate order. There is ample expression of statutory remedies in the laws passed by the Oireachtas under the Constitution. Section 37 of the Copyright and Related Rights Act 2000 provides that the owner of the copyright in work has the exclusive right to undertake or authorise others to make that work available to the public. This legal entitlement is being flagrantly violated by peer-to-peer illegal downloading. I can see no other way of looking at the problem. More than one of the conditions in s.2A of the Data Protection Act, 1988 as amended is met as to both the legitimate interests of Eircom, as a responsible company, and that of the community in general. The most important of those interests is that of abiding by the law. It is completely within the legitimate standing of Eircom to act, and to be seen to act, as a body which upholds the law and the Constitution. That is what the court expects of both individuals and companies. That expectation is derived from the rights protected under the Constitution and the general pact which the people of Ireland mutually made in founding a legal system, as the Preamble to the Constitution clearly declares, that is dedicated to attaining true social order. The insertion of express conditions by Eircom in the user – internet service provider contract, as quoted above, against the use of the internet as a facility for transmitting obscene images and against the infringing the copyright of others is a step taken in pursuance of a corporate policy that is no less than lawful and proper. It is abundantly clear that the data subject has given his or her consent, in return for obtaining internet access. Under contract, if any of these conditions be breached, then their access can be terminated. It may be that internet access is available elsewhere from other internet service providers on lesser conditions. If that is so it is hard to see, however, how conditions of a contract can validly avoid the law. These, however, are the conditions that apply here. A contract for service, involving termination for breach as a consequence on the operation of a condition is present by consent. That is not all. Furthermore, such processing, involving sifting the data from the plaintiffs, warning Eircom customers and, ultimately, cutting them off, is necessary for both the performance of a contract and for compliance with a legal obligation cast upon the courts, among other organs of the State, to defend the Constitution and the laws of our society. No one in the community can escape the law, as to the obligations that it imposes or the rights that it declares. The means of infringement, or the ideology that may grow around a medium of infringement, are not germane. Otherwise, the law lacks legitimacy.

Even if only s. 2(a)(1)(b) of the Data Protection Act was operative, it is legitimate for Eircom to have a corporate policy whereby the facilities that it hires out to the people of Ireland are used for lawful purposes only. Having that policy, they are entitled to pursue it by means of conditions in contract that incorporate an enforcement modality. The protocol is merely a more complex means to that end. I find it impossible to imagine that such interference is unwarranted because there is some fundamental right or freedom or legitimate interest in the data subject whereby, in contrast to those who engage in other forms of unlawful copyright theft which may leave them more readily subject to the law, the internet is used for the violation. There cannot be a right to infringe the constitutional rights of others, absent some argument as to a genuine and compelling competing right. In some instances, the purpose for which a right is asserted undermines its character as a right. There could not be, for instance, a constitutional right to privacy that extended to the organisation of a violent crime over the internet or by telephone. There is nothing disproportionate, and it is therefore not unwarranted, about cutting off internet access because of three infringements of copyright. The exceptions in the protocol, to which I have already referred in detail, provide for upholding relevant rights to medical care, to livelihood and to business use in appropriate circumstances. The protocol, at the relevant stage, is not inhumane or arbitrary. Rather, there is a right to make representations and these will, I am assured and I believe, be listened to if sensible and credible.”

The decison will now permit Eircom to implement the graduated response protocol worked out with rights holders. Ireland will now join France, UK, New Zealand, South Korea and other countries who have enacted or are in the final processes of enacting graduated response systems to help stem illegal online file sharing and to promote legitimate markets for the sale of creative products and services.

The article discusses the dynamics of why ISPs and rights holders should be motivated to work together to solve the problem of online file sharing. Apart from good business reasons, she points out that today ISPs are increasingly deploying “smart” technologies within broadband networks. Technologies like deep packet inspection (DPI) have given operators an unprecedented level of control over the content that flows through their pipes. These enhanced capabilities of ISPs may also increase their exposure to copyright liability as they are less and less “dumb pipes”.

Prof. Bridy proposes a set of principles to guide the implementation of private graduated response regimes. She contends that ISPs and rights owners “must take it upon themselves, in the interest of the customers they aim to get and keep, to ensure that their private arrangements for enforcing copyrights online are both adequately transparent and meaningfully consumer protective.”

The article proposes that privately implemented graduated response regimes be designed to minimize the likelihood of mistaken responses, to maximize opportunities for consumer compliance before the imposition of any sanction, and to limit the duration of any access-related sanction imposed in the absence of a neutral adjudication of infringement. In this regard, the following principles are suggested:

• Users should be given an opportunity to contest notices of infringement with their ISPs as the notices are received and before any sanction is imposed.
• When it comes to adding up strikes, ISPs should count a single notice of infringement that alleges multiple instances of infringement as only one ―strike against the subscriber receiving the notice.
• The principle underlying graduated response is that sanctions should escalate as infractions accrete. The disciplinary approach is an incremental one, and in the interest of consumer protection, there should be more, rather than fewer, increments when it comes to the nature and duration of access-related sanctions. To maximize opportunities for Internet users to comply, ISPs that agree to implement a graduated response regime should graduate the access-related sanctions they impose, beginning with a speed sanction after three uncontested notices and graduating to a brief suspension of access with the fourth.
• Broadband providers should provide full disclosure of their copyright enforcement practices to prospective and existing customers.

Others including professors Alain Strowel and Olivier Bomsel have separately made strong arguments for graduated response systems. Prof. Bridy’s article provides an analysis of the legal liability reasons why ISPs and content owners should work together. While the analysis flows from the copyright liability regime in the US, her analysis could well resonate in Canada in view of the decision of the Supreme Court in Society of Composers, Authors, and Music Composers of Canada v. Canadian Association of Internet Providers, [2004]  S.C.R. 427, 2004 S.C.C. 45 which conditioned certain ISP immunities on ISPs being a dumb pipe and being unable to discern the nature of the content flowing through their systems.

The article also provides practical insights into how a voluntary graduated response system might be implemented.

As Canada considers its options for copyright reform, we should be focusing not on whether we should implement graduated response, but on how we ought to do it.

France, the UK, and New Zealand have shown the way. Representatives from Belgium and now Turkey have also expressed support for implementing  such a regime. Yesterday’s iiNet decision in Australia shows that self-regulatory approaches may not work out as expected. And, economists like Professor Bomsel tell us that graduated response is the best way to internalize the externalities associated with copyright infringement to address online file sharing that is hurting creators and the creative industries.

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?

Until now, the roll-out of the Internet, which has contributed to the mass consumption of digital equipment at the end-user level, has ensured that digital information is the universal means through which the whole planet can easily communicate. With billions of mobile phones, hundreds of millions of PCs and tens of millions of iPods,all around the world,  digital information has become the global communication standard. During its expansion, this deployment has generated strong positive externalities, such as reduced transaction costs associated with digital communications.

However, with most people having already gone digital, these positive externalities might not keep growing at the same pace. The lukewarm welcome to the new Apple iPad illustrates that new digital devices have to now compete with a very wide range of existing ones. The positive externalities which were strong in the phase of substituting digital to analogue equipment may now saturate or, at least, enter into a slower growth period.

On the other side, negative externalities associated with the use of digital devices are growing fast. An example of a negative externality is the explosion of identity theft, a crime which costs both victims and society and which increases transaction costs in the online environment. A recent study by Credoc showed that in France the number of identity thefts was over 210,000 a year (double that of car thefts) with an average cost of 2230 euros (only 30% was covered by insurance).

In addition to these costs, there were also the costs associated with legal investigations and lawsuits paid by society. Of course, identity theft is only one example of negative externalities associated with the increased use of the Internet. Fraud, IP infringement, and child pornography are examples of many others.

Confronted with the rise of these negative externalities, there are only two economic options. One is to tax the Internet with the goal to reduce its usage and to compensate for the negative externalities. The other is to internalize the externalities through innovative specific targeted measures.

Copyright infringement is a negative externality. It raises transaction costs and inhibits investment in the creative industries. Avatar would never have been able to attract a 500 million dollar investment if this 3D movie was as easy to freely copy (free-riding) as a standard 2D video.

The question is then: how to internalize copyright enforcement? The cost-benefit analysis which needs to be made is not just comparing the cost of enforcing copyright with the “savings” of not enforcing copyright. It is comparing the cost of enforcing copyright with the cost of leaving copyright unenforced. Indeed, in the phase of the digital roll-out, the benefits of the digitization could temporarily outweigh the costs of not enforcing copyright. But now that digitization is ubiquitous, there is less benefit and much higher cost with not enforcing copyright. Worse, if copyright is poorly enforced at the end user level — with free-riding going unpunished — then incentives are given to innovators to help the consumer to free-ride. The longer this signal lasts, the higher the cost of copyright enforcement.

As I have written in much more detail elsewhere, graduated response whatever its cost be and whoever pays for it is a means to bring disutility to copyright free-riding. This disutility — a fine, a suspension, and even a criminal sentence for the most egregious offenders — affects the customer of both the ISPs and the equipment manufacturers. These will then have to help their customer to avoid this disutility. In other words, graduated response acts as a means to deter free riding at the end user level which creates incentives to enforce copyright at the industry one.

The cost, as Michael Geist rightly points out, is paid the by the digital industry and by the consumer. But frankly, is there any better incentive to innovate in order to reduce it ? And when it happens, the benefits are three-fold: 1) copyright will be better enforced, decreasing the transaction costs in the creative industries and markets; 2) it will ensure that compulsory license mechanisms are not needed to compensate for the creation/ financing gap; and, 3) the cost of copyright enforcement will progressively decrease, thus raising the overall social benefits.

Graduated response restores incentives along the copyright distribution chain, (in the digital networks and equipment), to enforce copyright. Thus, it makes copyright enforcement costs decrease instead of increasing when free-riding is not deterred. The graduated response is a means to internalize in the technical chain the enforcement of the copyright.

The beauty of graduated response is that, as of today, it is the best long term means to internalize the costs of free-riding while decreasing the costs associated with copyright enforcement. Opponents of graduated response like Professor Geist look at only one economic side of graduated response. But, as stated above, the cost-benefit analysis which needs to be made is not just comparing the cost of enforcing copyright with the “savings” of not enforcing copyright. One must compare the cost of enforcing copyright using graduated response with the cost of not implementing such as system. When this analysis is done, graduated response to address copyright infringement can be fully justified from an economic perspective.

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 rise of broadband Internet access and cheap storage, along with the growth of digital content, has enabled digital pi­racy to flourish around the world. Piracy enables the unau­thorized distribution of music, movies, television programs, software, video games, books, photos, and periodicals quickly and easily, to the detriment of creative artists and legitimate rights holders. These prac­tices threaten not only the robust production of digital content in the future, but U.S. jobs in the present. Unfortunately, many advocates, believing that information should be free, would have government not only turn a blind eye to digital piracy, but actively tie the hands of companies who seek to limit digital piracy. This report makes the case that digital piracy is a serious problem with significant ramifica­tions for the U.S. economy, that a number of approaches, including technical solutions such as content identification, are needed to reduce piracy, and that governments should support legitimate industry ef­forts to reduce digital piracy, including those that focus on the revenue streams of those engaging in piracy.”

 The paper makes a number of policy recommendations including the following:

 -Support, rather than impede, anti-piracy inno­vation, including the development of new technical means such as the use of digital rights manage­ment (DRM), network management, and content identification systems, to make piracy more difficult.

-Encourage coordinated industry action to take steps to fight digital piracy, including steps like ISP implementation of graduated response sys­tems.

-More actively pursue international frameworks and action to protect intellectual property, in­cluding digital content.

 The paper also addresses arguments put forward by some advocacy groups that have condemned the use of technical controls largely “because they believe that copyright holders should have fewer rights and that piracy is not a problem” and because “such tools are ineffective, costly and destructive to the rights of Internet users.” The ITIF deals with these criticisms as follows:

 “These criticisms, however, are flawed and inaccurate. Anti-piracy solutions, including con­tent identification technology such as watermarking and fingerprinting, are mature, highly accurate and widely available. The cost of these systems varies by implementation, but if the benefit in reduced piracy outweighs the cost of implementation, then it makes strategic sense to use the technology. These systems can easily be implemented with safeguards to ensure user privacy and protect free speech while still protect­ing the rights of copyright owners.”

 The paper also addresses the fears that “anti-piracy measures would somehow violate the Internet archi­tecture.” According to the report:

 “The Internet architecture is no more friendly to piracy than to law-abiding uses; the Internet was de­signed to serve as a testbed for experimentation with legitimate network applications, protocols, and ser­vices, not as a monument to technology as it existed at a particular moment in time. If the Internet has a central principle, it is one of continual improvement. As problems emerge in the use and management of the Internet, engineers devise solutions. With the advent of a global piracy industry, piracy has become a prob­lem that demands—and has produced—a number of solutions.

Additional technical controls may also help reduce pi­racy. ISPs and search engines could implement policies that block websites that host or link to pirated content. Pirated content is increasingly found not only on P2P networks, but also on websites for users to download or stream. These websites are supported by advertising or by selling the content to users. Blocking these web­sites at the ISP level and from search engine results, as well as pressuring advertising networks and credit card companies to refrain from supporting these websites, will help reduce this form of piracy.”

 The report also recognizes that legal strategies also are a key tool to fight piracy. As noted above, one such strategy is the implementation of graduated response systems. The report points out that a number of countries, including France, the United King­dom, South Korea, and Taiwan have implemented or are in the process of implementing graduated response processes with safeguards in place to ensure citi­zens’ rights are protected.

 A more detailed summary of the report is available online.

Another recent blog posting, Talking About Nerd Stuff: RE: Anti-Counterfeiting Trade Agreement, reviewed some of the anti-ACTA hype and came to the correct conclusion that simply relying on secondary and tertiary summaries of ACTA would give people a mistaken view about what is really known about the treaty. According to the blog:

“What’s my point, through all of this?

Firstly, everyone should educate themselves. In the internet age we have a tendency to rely very heavily on secondary and tertiary sources such as blogs, online news sites, and wikipedia. The problem with this is that levels of summary can often obscure the actual fact with interpretation. The fact itself is what you need to know, not what someone else might think that it implies.

Secondly, the ACTA isn’t something to fear at this stage, and it would be imprudent to begin to fear the adoption of a law, or laws, the substance of which is based upon rumour, conjecture, and leaked documents. Should you be somewhat concerned about possible ramifications? Yes, but there’s no sense being worried, or being “very afraid”, until we have some solid, actual sense of what this treaty will entail.”

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.