Monday, June 6, 2011

Piracy and Counterfeiting - The U.S. Trade Representative is very unhappy!

The Office of the United States Trade Representative (USTR) released their annual "2011 Special 301 Report" recently.  While it sounds more like a medicinal cream that one would use on a particularly itchy rash, it is actually an annual review of the protection and enforcement of global intellectual property rights (IPR).  The USTR is resolved to ensure that American IPR are maintained throughout the world to protect the holders of American copyrights.  In part, the report addresses the challenges of copyright piracy over the Internet in evil countries including Canada, Spain, Italy and Russia.  Nations that are seen to be in violation of American copyrights are placed on either a Priority Watch List (the really evil countries) or a Watch List (the somewhat less evil countries).

The 2011 Special 301 report examined Intellectual Property Rights in 77 nations that trade with the United States and has concluded that the following 42 nations have been naughty:

Priority Watch List:  Algeria, Argentina, Canada, Chile, China, India, Israel, Indonesia, Pakistan, Russia, Thailand, Venezuela.

Watch List:  Belarus, Bolivia, Brazil, Brunei, Colombia, Costa Rica, Dominican Republic, Ecuador, Egypt, Finland, Greece, Guatemala, Italy, Jamaica, Kuwait, Lebanon, Malaysia, Mexico, Norway, Peru, Philippines, Romania, Spain, Tajikistan, Turkey, Turkmenistan, Ukraine, Uzbekistan, Vietnam.

Section 306 Monitoring:  Paraguay.

Here is a quote from the opening paragraph of the 2011 Special 301:

"An important part of the mission of the United States Trade Representative (USTR) is supporting and implementing the Administration’s commitment to aggressively protect American intellectual property overseas. Infringement of intellectual property rights (IPR) causes significant financial losses for rights holders and legitimate businesses around the world. It undermines key U.S. comparative advantages in innovation and creativity to the detriment of American businesses and workers. In its most pernicious forms, it endangers the public. Some counterfeit products, such as automobile parts and medicines, pose significant risks to consumer health and safety. In addition, trade in counterfeit and pirated products often fuels cross-border organized criminal networks and hinders the sustainable economic development of many countries.

Because fostering innovation and creativity is essential to our prosperity, competitiveness, and the support of countless jobs in the United States, USTR works to protect American inventiveness and creativity with all the tools of U.S. trade policy, including this Report."

Basically, the USTR is acting on behalf of United States businesses to ensure that infringement on their property rights doesn't impact their ability to make profits.  The USTR is also concerned about counterfeit drugs, automobile and airplane parts, toothpaste, shampoo, razors, batteries, food and beverages, sporting goods and other manufactured items that we use every day since these counterfeit products could endanger the public and could be contributing to cross-border organized crime.  Interestingly enough, the USTR is concerned that countries that suffer from rampant counterfeiting and piracy are losing tax revenue since the counterfeit trade incurs no taxes or duties.

One issue that the USTR takes particular umbrage with is piracy over the internet and that is what this posting will focus on.  Now that many nations have given up their dialup internet access for high speed broadband, the USTR notes that the internet is a marvellous vehicle for the dissemination of copyrighted materials.  Perhaps the USTR would be happier if we all were stuck with our old 28.8 Kbps connection speeds!  The USTR notes that internet piracy is a particular problem in Brazil, Canada, China, India, Italy, Russia, Spain and the Ukraine.  Pirated products include the obvious movies and music as well as "apps", ring tones, ebooks and games.  Piracy is now a mobile problem with the advent of smart phones and tablets.  Here's another quote from the report:

"To encourage strong action against piracy over the Internet, the United States will seek to work with the following trading partners to strengthen legal regimes and enhance enforcement: Argentina, Belarus, Brazil, Brunei, Canada, Colombia, India, Italy, Malaysia, Mexico, Philippines, Romania, Russia, Spain, Thailand, Turkey, Ukraine, Venezuela, and Vietnam."

I love the use of the words "work with".  It's always nice to know that "sovereignty" is such a nebulous concept when it comes to protection of profits.

Let's take a more detailed look at a couple of the nations on the Priority Watch List, Canada and China.

1.) Canada: I found it rather surprising to find Canada right up there with Russia, Venezuela, Pakistan and India when it comes to getting a finger wag from the USTR for bad behaviour.  Here's yet another quote from the section of the report discussing the ills of America's closest trading partner:

"Canada remains on the Priority Watch List. The United States continues to urge Canada to implement its previous commitments to improve its legal framework for IPR protection and enforcement. Unfortunately, Canadian efforts in 2010 to enact long-awaited copyright legislation were unsuccessful. The United States encourages Canada to make the enactment of copyright legislation that addresses the challenges of piracy over the Internet, including by fully implementing the WIPO Internet Treaties, a priority for its new government. The United States encourages Canada to provide for deterrent-level sentences to be imposed for IPR violations, as well as to strengthen enforcement efforts, including at the border."

According to the USTR, Canada should provide its border Customs agents with the authority to stop the transportation of pirated goods across its borders simply because of their position as Customs agents.

Canada has tried several times to introduce new copyright legislation that ends up dying when the Harper government either prorogues Parliament or holds an election.  The latest attempt, Bill C-32 which you can find at the interestingly named "Balanced Copyright" website, was introduced on June 2nd, 2010 by Minister of Industry Tony Clement.  This was Canada's attempt to "...introduce legislation that will modernize Canadian copyright law for the digital age while protecting and creating jobs, promoting innovation and attracting new investment to Canada."  Bill C-32 was intended to "...bring Canada in line with international standards and promote home-grown innovation and creativity..." by "...allow(ing) copyright owners to pursue those who enable copyright infringement, such as illegal peer-to-peer file sharing sites."  Fortunately for all of us, the legislation was intended to protect internet service providers (ISPs) from prosecution should their nasty subscribers use their services to download all those copyrighted movies and music.  I would imagine that Bell Canada and Shaw were most appreciative!  Unfortunately for the Harper government (and much to the chagrin of the USTR I'm certain), Bill C-32 died a horrible death, having reached the point of Second Reading and Referral to Committee on November 11th, 2010 before the May 2011 election ended the process.

2.) China: This is the nation that seems to garner the lion's share of the USTR's attention.  In late 2010, China announced their "Program for Special Campaign on Combating IPR Infringement and Manufacture and Sales of Counterfeiting and Shoddy Commodities" (you've got to love that name) also known as the "Special Campaign.  This is an attempt to combat illegal downloads of music and movies, sales of pirated CDs and DVDs, illegal software, auto parts and pharmaceuticals.  For the first time, China's central government is now obliged to purchase legitimate copies of software for their networks.  In the online world, the USTR estimates that 99 percent of all music downloads in China are illegal.  Recent actions under the Special Campaign have led to the shuttering of several websites and the arrests and convictions of several website operators.  Fines for those involved ranged from $30,000 to $228,000 and prison terms ranged from three to five years.  Two major China-based video websites have now struck agreements with major United States studios to offer licensed rather than pirated content.  One website, Baidu, one of the USTR's "Notorious Marketers", will be offering licensed music albeit only with Chinese copyright holders signing up at this point in time, leaving United States rights holders still in the cold.

Not to worry you bad, bad nations.  The USTR has added a new program whereby offending nations that appear on their list can co-operate with the United States to work off some of their bad karma.  Here is a quote from the Report:

"...USTR is announcing that it invites any trading partner appearing on the Special 301 Priority Watch List or Watch List to work with the United States to develop a mutually agreed action plan designed to lead to that trading partner’s removal from the relevant list.  Agreement on such a plan will not by itself change a trading partner’s status in the Special 301 Report. However, in the past, successful completion of action plans has led to the removal of trading partners such as Saudi Arabia, Taiwan, and many others from Special 301 lists. An action plan may take more than one year to complete.  Action plans differ from OCRs, which are conducted between Special 301 annual reports."

As an aside, let's take a really quick look at a recent news item from New Zealand.  It seems that the government of New Zealand has become quite zealous about illegal downloading on the Internet.  In April 2011, the government pushed through a bill, the Copyright (Infringing File Sharing) Amendment Bill, which targets Internet users that illegally download or upload copyrighted material.  Under the law, ISPs will send warning letters to infringing downloaders and uploaders at the behest of copyright holders.  Repeat offenders will be disconnected from the Internet for a period of 6 months and could be assessed a fine of up to $15,000.  Ironically enough, a tweet sent out by a National MP set off a firestorm in the local media when she tweeted that she was listening to a compilation of music given to her by a friend, a potential infraction of the Copyright legislation.  Apparently the legislation puts the onus on the accused to prove their innocence.  As well, if the complexity of the legislation and the concept of filesharing (as shown here)  are barely understood by those who impose these laws upon us, how can the sweaty masses be expected to understand what is legal and what is not when there appear to be so many grey areas?

The tactics used by the USTR brings to mind certain school teachers from my past that used the technique of public humiliation to get their students to behave in a prescribed manner.  The "name them and shame them" technique is nothing more than an attempt to force Canada, and other nations, to succumb to the interests of the American recording industry among others.  Counterfeit pharmaceuticals and airplane parts are one thing; copying movies and music should be regarded entirely differently.  While theft is theft, I’ve always found it more than a bit annoying that with rapid changes in technology, one could have owned the same movie in Betamax, VHS, DVD, mp4 and Bluray.  In the case of music, one could own the same album as a record, eight-track, cassette, CD or mp3.  In each case, the changes in technology have resulted in complete abandonment of the previous iteration rendering rather expensive audio and video equipment completely obsolete.  Perhaps, in some ways, the recording industry has been its own worst enemy.

Now that Canada has a majority Conservative government, it will be interesting to see if Mr. Harper relents to the pressures from south of the border and updates Canada's copyright laws or if he tells the American Trade Representative to take a very long leap off a very short dock.


  1. unlike American authorities Canadian RCMP would righter investigate murders than kids downloading cartoons

  2. So company A spends millions on R and D, and company B sees that their product is successful and copies it. At the same time company B can afford to make its prices lower and eventually their are massive layoffs and pay cuts in company A, which can't be competitive.

    The bill might be a bit too broad, but that doesn't mean there is no point to it whatsoever.

    Of course, this means U.S companies should follow the same standard on respecting copyrights from other countries. What's good for the goose is good for the gander.

  3. We all get it. The music and film industry have been buying US politicians in an attempt to protect their changing world. They would rather we all see censorship then they lose profits. What they are learning is that the web generates much much more money then their combined industries. SOPA and PIPA support is an election nightmare for corrupt members of congress on the take. Congress needs to scrounge their funds from a different industry now and let the record companies and hollywood drown in their own greed.