U.S. intellectual property enforcement actions: the report

CNET News alerted me to yesterday’s release of the 2010 U.S. Intellectual Property Enforcement Coordinator Annual Report on Intellectual Property Enforcement (92 page PDF):

The 92-page report…reads a lot like a report that could have been prepared by lobbyists for the recording or movie industry: it boasts the combined number of FBI and Homeland Security infringement investigations jumped by a remarkable 40 percent from 2009 to 2010.

Nowhere does the right to make fair use of copyrighted material appear to be mentioned, although in an aside on one page Espinel mentions that the administration wants to protect “legitimate uses of the Internet and… principles of free speech and fair process.”

This is the first annual report released by the Office of the United States Intellectual Property Enforcement Representative (official website) since its creation in late 2008 and the Senate confirmation of the first Intellectual Property Enforcement Coordinator (“copyright czar”) in late 2009.  Although it covers a wide range of intellectual property issues, I will mostly limit this post to copyright-related items.

Here are some “highlights” from the report:

1.  Policy statement regarding Internet enforcement actions (pp. 5-6):

The debate over the proper role of government in the online environment extends to the issue of intellectual property enforcement: that is, reducing the distribution of pirated or counterfeit goods online or via the Internet, including digital products distributed directly over the Internet or physical products advertised or ordered via the Internet. The choices made in the area of intellectual property enforcement can have spillover effects for government action, regulation or intervention in other areas. Therefore, this office has given considerable thought to the best approach towards enforcement in the online environment. As outlined below, we believe the right approach is one that combines forceful criminal law enforcement with voluntary and cooperative action by the private sector consistent with principles of transparency and fair process. [emphasis added]

Almost as an after-thought, the report later notes (p. 7) that,

without mandating business models, we believe it is important to encourage the development of alternatives for consumers that meet their legitimate needs and preferences. We note some activity in the marketplace to develop new and more flexible methods of distribution and will look for opportunities to support those efforts.

2.  Summary of the current state of the proposed Anti-Counterfeiting Trade Agreement (ACTA) (Wikipedia backgrounder) (pp. 22-23):

ACTA requires, among other things, that signatories establish effective intellectual property enforcement legal frameworks, including obligations to:

  • establish criminal procedures and penalties for willful trademark counterfeiting or copyright piracy, or importation or use, on a commercial scale, and aiding and abetting criminal conduct, and authorizes criminalizing camcording;
  • establish laws that impose imprisonment and destruction as penalties for criminal violations of enforcement laws;
  • establish civil enforcement laws that enhance the tools available to rightholders to crack down on counterfeiting and piracy, including by providing for meaningful damages for rightholders, the destruction of counterfeit goods and also including appropriate safeguards against abuse and to protect privacy as appropriate;
  • ensure that civil and criminal enforcement laws are equally applicable to copyright infringement occurring online; and
  • establish anti-circumvention laws to protect the use of technological protection measures (digital locks).

3.  Summary of successful efforts to recruit private-sector actors into IP enforcement (pp. 27-28)

We believe that most companies share the view that providing services to infringing sites is inconsistent with good corporate business practice and we are beginning to see several companies take the lead in pursuing voluntary cooperative action.

For example, earlier this year, MasterCard withdrew services from Limewire, a well-known file-sharing site. In addition, MasterCard has done an internal assessment of its processes to address infringing sites and has begun a number of cooperative discussions with rightholders….On December 2, 2010, Google announced a number of steps it will take to make its response time to complaints more rapid, to limit the ability of websites used to sell infringing goods to obtain ad revenue and to increase access to legitimate sites….We need to eliminate financial gain derived from infringement. While some products are sold directly, other sites obtain revenue from advertising. The IPEC is in the process of gathering information about the online advertising business to see if there are means to limit illegal sites from using ad revenue as a business model.

4.  Statistical summary of (generally) increased investigations/enforcement/arrests/convictions/seizures (pp. 31-32):

  • In FY 2010, ICE HSI intellectual property investigations increased by more than 41% and ICE HSI arrests increased by more than 37% from FY 2009.
  • In FY 2010, FBI intellectual property investigations increased by more than 44% from FY 2009….
  • In FY 2010, courts sentenced 207 intellectual property defendants. More than half—121—received no prison term, 38 received sentences of 1-12 months in prison, 27 received sentences of 13-24 months in prison, 10 received sentences of 25-36 months in prison, 7 received sentences of 37-60 months in prison and 4 received sentences of more than 60 months in prison….
  • CBP and ICE HSI had 19,959 intellectual property seizures in FY 2010. The domestic value of the seized goods—i.e., the value of the infringing goods, not the  manufacturer’s suggested retail price (MSRP) for legitimate product—was $188.1 million. The estimated MSRP of the seized goods—i.e., the value the infringing goods would have had if they had been genuine—was $1.4 billion.

***

A final note:  the report trumpets success–a lot.  Examples abound, but perhaps the most amusing is a case involving counterfeit Cisco equipment sold to the Marines for use in battlefield-critical networks in Iraq.  I’m certainly glad that the government caught this, but do they really have to mention it three separate times (on pages 5, 41, and 50) in the report?

Roundup of additional commentary:

Found hypocrisy; still searching for clarity

In case you haven’t heard, a few days ago Google started publicly accusing Microsoft’s Bing of stealing its search results.  Juan Carlos Perez over at PCWorld has published an interesting roundup of reactions to Google’s new “strategy” of public accusations:

While the merits of Google’s accusation are up for debate — Microsoft denies the charge — the fact that Google chose to complain in such a loud and agitated manner has become fertile ground for analysis and comment by industry observers.

Opinions range from those who view Google’s actions as hypocritical to others who say the company did the right thing by airing its grievance.

PCWorld’s link to Daniel Eran Dilger reaction over at Roughly Drafted is especially worth checking out.  Personally, I come down on the “Google is being hypocritical” side of things.  It’s hard to have the expansive view of copyright law and fair use that Google embraces for its own activities and then to complain with any legitimacy about Microsoft’s alleged behavior.

Unfortunately, copyright law in general (and fair use in particular) is notoriously unclear, malleable, and subject to judicial whims.  It’s doubtful that Google will actually sue Microsoft over this, so we may never know what the “answer” is.

However, even if a U.S. court upheld Microsoft’s right to copy Google’s search results (assuming that’s what happened here), that would only give us an answer (1) on these specific facts (2) as between parties willing to litigate (and maybe even (3) before that particular judge).  Given the high costs of litigation, most non-Fortune-500 copyright users claiming fair use rights usually find it is in their best interest to settle for a few thousand dollars when saddled with a copyright infringement lawsuit.  Indeed, there are companies based on this very business model that are out there suing people; the number of copyright infringement suits is rising.

This latest spat between Google and Microsoft is, to some extent, a sideshow, but it does highlight some of the problems that uncertainty breeds within copyright law.  I’m not worried about Microsoft’s ability to defend itself:  it’s a multi-billion dollar company with lawyers and PR specialists both in-house and on speed dial.  I am worried about the start ups that are seeking to be the next Google or Microsoft:  they generally can’t afford to get anywhere close to the line because they know that an infringement lawsuit may mean millions in legal fees and damages, so they back off and play it safe.

That’s the real cost of un-clarity in copyright law.