Another case ended in victory for the music group in 2008, with a blockade of The Pirate Bay the end result.

In 2011 the music industry looked to expand its list of blocked domains by using anti-piracy group Rettigheds Alliancen (Rights Alliance) to attack US-based streaming service Grooveshark via the courts. A matter of months later the coalition of 30 rightsholders prevailed in a case in which Grooveshark took no part.

While the entertainment industries are now well capable of obtaining blocking injunctions against pirate sites, each action has to be targeted at a specific service provider. That means that while an injunction might be issued against one ISP, rival ISPs are free to carry on providing access.

This week, however, all that changed.

Following negotiations with anti-piracy group Rights Alliance, the telecommunications industry in Denmark has signed a Code of Conduct which will ensure that blockades are put in place country-wide.

The agreement ensures that when a court issues an injunction against a single ISP ordering it to implement DNS blocking against a ‘pirate’ site, within days all rival ISPs will voluntarily implement a similar blockade.

Speaking for the telecoms sector, Jakob Willer of Tele Industrien said that industry-wide regulation will support the growth of authorized services.

“In the telecommunications industry, we find it important to ensure rapid and effective implementation of regulatory decisions across the entire industry. It is also important to ensure the development of legitimate online services, where consumers can find what they are looking for and the artists can get paid for what they have created,” Willer said.

Rights Alliance chief Maria Fredenslund is pleased with the agreement which will assist her group and its members to more easily block ‘pirate’ sites at the ISP level. Under the Code of Conduct, ISPs will block domains within seven days of another provider being issued with an injunction.

Commenting on the agreement, Minister for Culture Marianne Jelved said that it’s important for rightsholders to have tools at their disposal when they feel that their music, movies and books are being used online without their permission.

“I am glad that the copyright holders and telecommunications companies in this area are working together to ensure that we have the most creative and legal digital content. The new Code of Conduct is an important step in this effort,” Jelved said.

The Code of Conduct also allows for expanded blocking if ‘pirate’ sites move to new IP addresses or domains. However, the code states that should wrongful blocking occur due to rightsholder error, then the rightsholders will be liable to the ISPs for any financial costs incurred.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

PIPCU, as its more commonly known, has been involved in the closure of dozens of domains, the closure of several sites, and the arrests of individuals up and down the country.

Until now PIPCU’s most visible partners, at least in terms of enforcement in the Internet space, have been the Federation Against Copyright Theft (movies and TV) and the BPI (music). However, there are now signs that sites offering pirated ebooks are part of PIPCU’s strategy.

Like many movie, music, sports and proxy fans have in recent months, this week visitors to the ebook site OnRead.com were confronted with the ominous PIPCU “seized” notice.

“You have tried to access a website that is under criminal investigation by the UK Police Intellectual Property Crime Unit (PIPCU). This site is being investigated for online copyright infringement,” the page reads.

The signs suggest that OnRead knew something was coming. After regular and often daily tweets of new literature appearing on the site, on September 2 the account fell silent.

TorrentFreak asked City of London Police for specifics on the site’s closure, including whether the domain seizure and shutdown had been carried out together with The Publishers Association, a known PIPCU partner.

“As part of Operation Creative PIPCU is working closely with the Publishers Association, as well as FACT, IFPI and BPI to disrupt copyright infringing websites. Since the launch of the operation several illegal film, music and publishing sites have been suspended,” a PIPCU spokesperson said.

While it seems more than likely that OnRead was operating without licenses recognized by UK publishers, an archive of the domain reveals that the site’s operators tried to claim that in at least one jurisdiction the site had operated legally.

“All materials presented on this site are available for the distribution over the Internet in accordance with the license of the Russian Organization for multimedia and Digital Systems (ROMS) and intended for personal use only. Further distribution, resale or broadcasting is strictly prohibited,” the recent archive reads.

ROMS was a Russian collective rights management organization that attracted public attention in 2006 when notorious music download site, AllofMP3, insisted it operated legally under ROMS’ remit to collect and distribute statutory royalty payments as allowed under Russian law. In 2007, AllofMP3 closed down for good.

While the legal claims made by OnRead are fuzzy and by now years out of date, additional notes do warn users that they have “no right to download any files from the site if this violates the law of his country.”

It’s clear that PIPCU and quite probably The Publishers Association felt that OnRead was not in compliance with UK law. As a result the site’s domain, registered with InternetBS, is now in police hands.

In 2007, ZML.com, a site that offered movies to US customers, also tried to claim ROMS protection. That domain is now under the control of ICE and Homeland Security after being seized in the very first wave of Operation in Our Sites.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

On top of many previous ventures, just this week the MPA achieved a fresh set of blocks in the UK to black out SolarMovie and TubePlus, a pair of movie streaming portals that have been growing in popularity for some time. The recent action only adds to a long list of sites currently blocked in the country on copyright grounds.

But while concerted UK action is a fairly recent development, another country not too far away has been getting in on the web censorship action for some time. In addition to wiping out at least 20 gambling-related sites, during 2006/7 legal action in Denmark resulted in the blocking of two famous MP3 download sites, Russia-based AllofMP3 and MP3Sparks. In 2008, then key domain of The Pirate Bay, thepiratebay.org, was added to the list.

After a break of four years, in 2012 three more domains were censored on copyright grounds – thepiratebay.se, homelifespain.com and streaming music service GrooveShark.com. And now a year later, rightsholders have returned once again.

Court documents reveal that Fox-Paramount, Sony Music, Disney, Universal Pictures, Warner Bros. and several local companies went to court to have ISP Telia block four of the most popular movie and TV show sites in the region – Movie4K.to, PrimeWire.ag, Swefilmer.com and Dreamfilm.se. The Copenhagen City Court granted the request.

“The four sites are the most popular among users, and the sites each offer thousands of movies without paying money back to the people who have invested in the films. Prime Wire for example offers around 55,000 movies,” anti-piracy group Rights Alliance said in a statement.

“It is a problem for filmmakers because they miss out on the revenue needed if they are to make new films in the future. Instead the money is flowing to the people behind the illegal movie sites. These activities are illegal and web blocking helps us to stop them.”

The anti-piracy group says that while some of the sites offered to remove infringing links, attempts at giving them the opportunity to defend themselves failed.

“We have tried to give the organizers behind the sites a chance to meet up and argue their case by sending information via their domain name registrations but none have thus made themselves known,” Rights Alliance said.

What is interesting about these new Danish blocks is that unlike in the UK where users are simply advised that a page has been banned, local ISPs display a banner which directs users to ShareWithCare.dk, a site that offers links to legal content. It is operated by Johan Schlüter Advokatfirma, the law firm acting on behalf of the plaintiffs in the blocking case.

Meanwhile in Norway this week, an anti-piracy group confirmed they are taking the next steps to having sites in the country blocked on copyright grounds. Unsurprisingly The Pirate Bay is on the top of the list.

“We have been preparing the process for a couple of months, and we anticipate that we will shortly be in talks with several Internet service providers in Norway to block illegal sites. First and foremost we will go after The Pirate Bay,” said Willy Johansen, Secretary General of the Norwegian Videograms Association.

Those talks are expected to get underway early December but although a new law in Norway does allow the blocking of sites, according to lawyer Olav Torvund, the threshold remains fairly high.

“First, you have to prove that there are violations of copyright on a large-scale, then the court must weigh up whether to shut down access to freedom and freedom of information,” Torvund said.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

For well over a decade there have been big sites, mainly hosted in Russia or Ukraine, that allow their users to download music for a fraction of the prices quoted by outlets such as iTunes. Historically the sites claimed protection under licensing from the Russian Multimedia and Internet Society (ROMS) but that has always been a controversial assertion. Few if any pay money to western labels.

One of the most famous, AllofMP3.com, generated dozens of news headlines around 2005 and even became a political issue when the United States suggested that Russia’s entry into the World Trade Organization would be threatened by the site’s existence.

On August 22 2012 and after 19 years of waiting, Russia became the 156th member of the WTO but despite complaints from the U.S., dozens of similar sites continue to operate in Russia and across the border in Ukraine.

Although many have come under pressure from payment providers, most still seem able to take money, even from giants Visa and Mastercard. Previously sites have chosen to charge a few cents per track (around $1.00 per album) but more recently the trend is to offer unlimited music for a set price. Others allow users to charge their accounts with payments of around $25.00 each in order to spend those balances over time.

One of the sites offering this model was LegalSounds. Online since 2005 and launched with a campaign that announced “The end of peer-to-peer networks is near!”, the site offered MP3s for around $0.09 each. But while this may have worked well for a while, the party is now over.

“We are terribly sorry, but due to recent changes in Russian Federation legislation (Anti-Piracy Law, which came into force August 1), we can’t continue offering you our service,” LegalSounds announced in a brief statement.

“Thanks for all of you, who supported legalsounds.com through these years. We hope to come back with something new.”

It’s far from clear why LegalSounds felt an urgent need to close down. Thus far no application has been made to the Russian authorities to have content removed from other MP3 sites under the new legislation (it only covers movies and TV shows) and there is currently no indication that other sites intend to follow.

In the meantime and for the customers hit by the closure, the outlook isn’t good. LegalSounds’ Facebook page appears to have been abandoned, leaving behind only furious ex-customers who seem to have lost all the money they had in their accounts. While there are threats ranging from class action to murder, few users of the site appear to have read LegalSounds’ terms and conditions.

“Only payments made from credit cards are refundable. The entire amount of transaction is subject to be refunded. Partial refunding is not allowed. Refund can’t be provided when customer used part of the balance,” the ToS on the now-dead site used to read.

Whether this closure will have a chilling effect on the cheap MP3 market remains to be seen. That will largely depend on whether other sites follow suit.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

These so-called “strike” programs are continuing to spread and recently landed on U.S. shores.

While they are supposedly educational in nature, there is a massive parallel problem with some rightsholders choosing to sue file-sharers instead. Indeed, hundreds of thousands of U.S. citizens have been targeted in recent years.

This situation appears to be something the Russian government wants to avoid. According to the head of a government department with responsibility for communications, his country won’t proceed with holding Internet users liable for downloads, despite having many millions of file-sharers.

Speaking at the launch of the “Read Legally” campaign, a nationwide initiative to encourage citizens to obtain eBooks from official sources, Vladimir Grigoryev, head of the Federal Service for Supervision of Communications, Information Technology and Mass Media (FAPMC), said that his country will not be following the more aggressive approaches at play in the U.S.

“We do not plan to hold Internet users liable for downloading as they do in the U.S., where owners of computers can end up in court,” Grigoryev said.

Russia does intend, however, to take a tougher stance with infringing sites. As reported in January, sites will be expected to conform to stricter notice and takedown standards if they are to avoid trouble.

“Responsibility [for illegal downloads] will be placed on the owners of pirate websites,” Grigoryev confirmed, adding that Russian file-sharers can expect to be subjected to advisory measures similar to those already underway in the United States.

“[File-sharers] will enter an educational campaign,” he said, stopping short of elaborating on how such a project would be operated.

The decision to focus on sites is something U.S. rightsholders will be keen to see in action. In recent years there have been endless complaints from the music industry, particularly over so-called AllofMP3 clones and VKontakte, Russia’s answer to Facebook. To date little has been done to stop their growth, despite fiery complaints from the USTR.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Today we can report that Greece is the latest country to walk down the controversial path of web censorship for the protection of intellectual property. The Athens First Instance Court has just handed down a ruling which orders the country’s ISPs to begin censoring a pair of sites the music industry says are infringing their copyrights on a grand scale.

The ruling is based on Article 64A of law 2121/1993 which states that “Rightsholders may apply for an injunction against intermediaries whose services are used by a third party to infringe copyright or related rights.”

A similar provision in Section 97A of the UK’s Copyright, Designs and Patents Act led to The Pirate Bay being blocked there earlier this month.

Interestingly, neither of the sites to be blocked in Greece is The Pirate Bay, and the unusual features don’t stop there. The first site to be censored is Ellinadiko.com, a music sharing forum that was once very popular with locals. We’re referring to the site in the past tense since it appears to have shut down.

The second site to be blocked is Music-Bazaar.com, a Russian operated and hosted ‘AllofMP3′-style webstore selling MP3s at bargain basement prices. These sites are a thorn in the side of the recording industry but operate with both impunity and arguable legality in Russia.

The blocks will be initiated in two ways. ISPs will have to tamper with their DNS records so that subscribers trying to access the sites will be redirected elsewhere, probably to an ISP holding page.

Second, and to thwart people trying to visit the sites without the use of a domain name at all, the IP addresses for the sites will be filtered out. However, according to discussion on Greek file-sharing forums, the IP addresses listed in the court order are no longer in use by either site having been changed a while ago.

Following similar actions taken by the Dutch and UK Pirate parties, the Greek Pirate Party are indicating that they are “ready to implement any lawful technological measure to ensure freedom of communication, speech and exchange ideas online and in society.”

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

RettighedsAlliancen chief Maria Fredenslund said that Grooveshark had no content agreements or licenses with members of her group, accused the service of being “completely uncooperative” in negotiations, and that effectively taking down content from Grooveshark had proven impossible.

The resulting legal action was directed “randomly” at telecoms company ’3′ with a complaint that the ISP’s customers breach copyright and as their supplier they are contributing to infringements.

’3′ argued that not all content on Grooveshark is offered without permission since artists and labels legally upload and distribute their music via the service. If the court did indeed order an injunction its effects would be disproportionate and result in the censorship of legal content, ’3′ argued.

However, the court said that even though certain aspects of the Grooveshark service may be considered legal, the extent of the copyright violations being committed using the service overwhelmed them.

The Bailiff Court said that ’3′ was unlikely to suffer any financial losses as the result of an injunction and since ’3′ customers are violating copyright law when they stream music from Grooveshark, they would not be able to claim compensation from ’3′ when they could no longer access the site.

Based on the Danish implementation of the Infosoc Directive, the court ordered an immediate injunction against ’3′ which prohibits it from facilitating subscriber access to Grooveshark.

“Grooveshark is an illegal site, which is really big and popular. But they have a business model that is based on trickery and fraud,” said RettighedsAlliancen chief Maria Fredenslund commenting on the news.

“Many users believe that when they use Grooveshark payment goes back to the artists and producers. So we think it was important to close off access so the legitimate sites have a chance to recover,” Fredenslund added.

But Troels Møller, co-founder of internet think-tank Bitbureauet, says blocking access to Grooveshark is a step too far.

“This is an attack on free speech and basic Internet freedom. Danish politicians need to educate themselves on this subject, and realize that what is going on is very dangerous. It’s a slippery-slope into complete internet censorship,” he told TorrentFreak.

“In Denmark we are seeing this kind of censorship in more and more areas. It has expanded from blocking child abuse-sites to also blocking file-sharing sites like The Pirate Bay, and again to foreign pharmacy and gambling sites. And now we see blocking of music streaming sites without the proper license. What’s next?”

In the meantime, ’3′ are planning their next move

“We have received the result and will now decide what to do next,” Stinne Green Paulsen, Communications Manager at ’3′, told TorrentFreak. “We have four weeks to decide if we want to proceed or not.”

Proceeding would mean ’3′ taking the case to the High Court, but whatever the decision in the meantime the injunction will stand.

In addition to Grooveshark, other sites that have been blocked in Denmark on copyright infringement grounds include AllofMP3 and more recently The Pirate Bay.

RettighedsAlliancen did not immediately respond to a request for comment.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

The IIPA, which counts the Association of American Publishers, BSA, ESA, Independent Film & Television Alliance, MPAA, National Music Publishers’ Association, and the RIAA among its members, has listed its grievances against a whole host of countries.

Unsurprisingly, especially given its members’ focus, the main complaints concern movie, music, video game and software piracy. The complaints about infringement in the digital realm are numerous.

From the Priority Watch List, the file-sharing focus falls on Canada, China, Russia and Ukraine.

Canada

According to the IIPA, Canada is “a haven where technologically sophisticated international piracy organizations can operate with virtual impunity in the online marketplace.” This is due, says the group, due to Canada’s reputation for having “weak, ineffective or non-existent” laws to outlaw infringement.

The IIPA notes correctly that Canada plays host to large numbers of BitTorrent sites including perhaps its most famous, isoHunt. The group says that the site has “operated with impunity” for more than 8 years despite being the subject of an injunction issued by a U.S. court. Of course, by definition the U.S. is outside Canadian jurisdiction

Other major torrent sites mentioned as having “Canadian connections” include KickAssTorrents and Torrentz.eu. It’s also noted that many French language torrent sites are operated from Quebec.

File-sharing related actions IIPA recommends Canada takes in 2012
Establish clear liability and effective remedies against those who operate illicit file-sharing services, or whose actions are otherwise directed to promoting infringement.

Enact strong legal incentives for Internet Service Providers to cooperate with copyright owners in combating online piracy, including by limiting the scope of liability safe harbors in accordance with international best practices.

China

The IIPA lists the main sources of online piracy as music portal sites, P2P services, deep-linking services (aka search engines), forums/blogs and cyberlockers. File-sharing client Xunlei and other services offered by its operators are mentioned several times.

Generally the situation in China has improved over the last 12 months with the IIPA noting that major P2P sites have “cleaned up” their pirated content. Illicit streaming services are described as problematic, as is the increase in consumption of illicit content via cellphones.

File-sharing related actions IIPA recommends China takes in 2012

The requests are many, but notably include increasing criminal prosecutions for services such as Xunlei and ‘deep-linking’ search engine operators such as Sohu/Sogou. The IIPA is also calling for China to allow foreign rights holder associations to conduct local anti-piracy investigations, and to lower the threshold for infringement to be considered criminal, to include non-profit copying.

Russia

The IIPA singles out two BitTorrent trackers as especially problematic – RUTracker.org (the renamed torrent.ru) and GameTorrent, a tracker alleged owned by a Russia national but hosted in Estonia.

According to the submission, Russia is home to the “world’s two most prolific criminal release groups” who camcord movies in local theaters and upload them to the Internet. The unnamed groups are said to have been responsible for 77 “exceptional quality” camcorded movies in 2011. A streaming video links site listed as offering such movies is the popular Video2k.tv

On the free music front, Russia’s Facebook equivalent, vKontakte, is singled out for criticism, despite apparently responding correctly to takedown demands.

“While vKontakte will generally takedown specific content when notified, that is an inappropriate enforcement mechanism for a problem of vKontakte’s own making,” the submission states.

Sites that charge a nominal amount for music, such as the numerous AllofMP3-type clones, are described as an “important source of piracy” which have grown to more than 30 in number since that site’s demise.

File-sharing related actions IIPA recommends Russia takes in 2012

As with China, the requests are numerous but focus on the takedown of unlicensed music streaming services and social networks (i.e vKontakte), MP3 download sites, BitTorrent trackers, and action against site operators even if their servers are outside Russian jurisdiction. IIPA also calls for changes in the law to force greater cooperation from ISPs against infringement.

Ukraine

Unsurprisingly, Demonoid.me is the focus of the IIPA’s anti-BitTorrent sentiments in Ukraine with claims that the site offers 75,000 movies and 47,000 TV shows for free. Cyberlocker EX.ua, which was raided in January but is now back online, leads the IIPA’s file-hosting complaints.

File-sharing related actions IIPA recommends Ukraine takes in 2012

IIPA wants Demonoid and pay-MP3 sites such as MP3Fiesta taken down by the police. Under current Ukraine law, ISPs are not responsible for the actions of their users, a situation that causes rightsholders problems say the group.

From the Watch List, the file-sharing focus falls on Italy, Spain and Switzerland.

Italy

The IIPA reports progress in Italy in recent years, citing the court-ordered ISP blockades of The Pirate Bay and the recently and voluntarily shuttered BTjunkie. Several other file-sharing sites have also been closed but IIPA says that further takedowns are being hindered by authorities not taking infringement seriously enough.

The Peppermint Jam case, which resulted in Italy’s Data Protection Authority ruling that monitoring P2P users and collecting their IP addresses is illegal, also causes problems for rightsholders.

File-sharing related actions IIPA recommends Italy takes in 2012

Take additional criminal actions against P2P services that meet the criteria for injunctions and liability established in the Pirate Bay decision and order ISPs to block access to those services.

Eliminate legal obstacles for rights holders to gather IP address evidence against file-sharers.

Spain

According to the IIPA, 55% of Spain’s online music piracy takes place via P2P networks such as BitTorrent, eMule and Ares, 34% via hosted websites and 11% via streaming services.

The ESA claim that there are around 30 major Spanish websites offering links to illicit copies of video games and bemoans the lack of support from local ISPs in tackling the problem. Nevertheless, since P2P linking sites have been ruled legal in Spain many times before, up to now there has been very little they can do.

File-sharing related actions IIPA recommends Spain takes in 2012

IIPA says that P2P really took off in 2007. It’s probably not a coincidence that in 2006 a circular from the Attorney General proclaimed the decriminalization of P2P downloads. No surprise then that IIPA wants this announcement “corrected”.

The group also wants the ability for rightsholders to bring civil and criminal actions against infringers by allowing them to obtain identifying information, and the law modified so that so that rights holder-submitted notices of infringement are capable of imparting ISPs with effective knowledge that infringement is occurring through its service without a court order.

Switzerland

The IIPA criticism of this land-locked country begins with a long-time enemy, the Razorback2 eD2K (eDonkey) indexing system which was subjected to huge raids in 2006 but later recovered. Swiss-based file-hosting giant RapidShare gets a brief mention as host of infringing content, but avoids the aggressive criticism of the past.

The main problem for the IIPA appears to concern current law.

“Since Switzerland’s copyright law contains a private copy exception with no expressly stated legal source requirement, downloading and streaming from servers operated by pirates outside Swizterland are being portrayed as legal in Switzerland by the press and anti-copyright activists, as long as there is no uploading,” the IIPA states in its report.

The IIPA also bemoans the fact that Swiss law allows DRM circumvention which taken together with the private copying exception “would allow individuals to circumvent access or copy control measures in order to copy from illegal sources and share with friends.”

File-sharing related actions IIPA recommends Switzerland takes in 2012

The 2010 ‘Logistep ruling‘ meant that collecting IP addresses in Switzerland with the aim of later filing a lawsuit was confirmed to be illegal and that IP addresses are personal data. IIPA would like the Data Protection Act changed to allow pursuit of infringers.

From the Special Mention List, the file-sharing focus falls on Hong Kong, former home of the now-defunct MegaUpload.

Hong Kong

Surprisingly, Megaupload isn’t mentioned at all in the IIPA submission, not even as a copyright enforcement “success story”. The same cannot be said about Filesonic, one of the world’s leading cyberlocker services.

Filesonic is among the top 10 file-sharing sites on the Internet, with a quarter billion page views a month. It disabled all 3rd party sharing in the wake of the Megaupload shutdown and actively blocks Hong Kong IP address.

None of this appears to have improved its standing with US entertainment companies. In its report the IIPA refers to Filesonic as an “infringing distribution hub” so when combined with a previous announcement by Hong Kong customs, Filesonic must be left feeling uneasy.

File-sharing related actions IIPA recommends Hong Kong takes in 2012

The IIPA notes that Hong Kong is working with rightsholders to combat infringement but more must be done, including the tightening up of proposed copyright-related legislation with a particular eye on punishing repeat infringers.

Summary

The IIPA submission is long, detailed, and actually informative and objective in parts, but it’s also peppered with language, insinuations and omissions one might expect of the lobby groups involved.

In the main, countries are criticized for not having tough enough laws to support US interests and where they do they’re criticized for not enforcing them.

ISPs are being put under pressure around the globe and are either criticized for not living up to their responsibilities under the law or where they do, for not doing enough to voluntarily assist rights holders.

File-sharing sites, wherever they may be, are branded as criminal organizations. Authorities are encouraged to legislate with that in mind, sooner rather than later.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

Even most opponents of SOPA/PIPA maintain a common front on this issue: the foreign thief must be stopped. Chris Dodd is right about this: the only public debate is about how.

For the past few years, Kim Dotcom (nee Schmitz) has been the MPAA’s go-to example of the foreign thief. Dotcom is a flamboyant hacker/entrepreneur with a fraud conviction, a penchant for fake names, and a fortune built, like many new media fortunes, in the grey areas of IP law. Megaupload was one of the first cloud storage or ‘cyberlocker’ services, and is routinely ranked in the global top 50 in traffic. There is little doubt that it hosted a lot of infringing media. There is doubt about the extent to which Megaupload encouraged this, and how that affects their liability for infringement.

The Megaupload case has important legal implications. Mike Masnick has a very good rundown, but let’s focus on two. The case will certainly challenge the scope of the “safe harbor” from liability afforded online storage providers—a very important issue in an era of cheap, ubiquitous cloud services. It will also be a front in the government’s (and, more particularly, MPAA’s) push to shift from an ex post model of enforcement, involving notification and takedown requests when infringing content is identified, to an ex ante model based on the surveillance and filtering of user activity.

If this sounds familiar, it’s because it is also fundamentally at stake in SOPA, and raises all the same censorship and free speech issues. Holding Megaupload liable for failing to monitor and filter user activity for infringement, for example, would compel monitoring across a wide range of web services, from search to social media. And that would mark a very fundamental shift in the freedoms associated with the Internet. SOPA and the Megaupload case are part of this long game.

The Megaupload indictment is also a public effort to cast a villain in the file sharing story: to prove that someone, other than consumers, benefits from piracy. Kim Dotcom’s arrest—with all of his luxury cars on prominent display—is about making the case not only for abstract losses to industry but also theft from industry. We’ve repeatedly taken issue with the industry calculation of losses, most of which are fictional. But let’s ask the narrower question. Who is the foreign thief, and how much is he stealing?

As usual when talking about piracy, there are lots of claims but very few hard numbers. The revenue estimates that do circulate in file sharing cases are notable, however, for their miniscule size compared to the 10s or, occasionally, 100s of billions in losses claimed by industry groups. Here are a few examples…

• The Swedish trial of The Pirate Bay trial in 2009 became an occasion for all sorts of competing estimates of revenues. Record industry group IFPI estimated the site’s revenues at $3 million per year. The MPAA described $5 million in revenues. But prosecutors endorsed a much lower number: $170,000 from advertising (against what the defense characterized as $112,000/year in server/bandwidth costs and $100,000 per year in revenue). This is for a site that appears consistently among the top 100 visited sites in the world.
• NinjaVideo, a Brooklyn-based movie indexing site whose owners were arrested in 2011, was alleged by prosecutors to have made $500,000 in 2½ years. After the site began to make money, the four administrators split the revenue, netting around $33,000/year each after expenses. Hana Beshara, the site’s primary owner, was sentenced to 22 months in prison under the US No Electronic Theft (NET) Act.
• Brian McCarthy, the owner of Channelsurfing.net, a Texas-based sports streaming site, was alleged by prosecutors to have made $90,000 over five years. He also faces jail time and fines under the NET Act.
• Immigrations and Customs Enforcement (ICE) made some partial revenue estimates for targets of its 2010 domain name seizure program, Operation In Our Sites, based on information from advertising network Valueclick. According to ICE investigators, Torrentfinder, a BitTorrent site, made about $15,000 in ad revenue from Valueclick over a year in 2008-2009. Onsmash, a music link site, made around $2,500 in 2009-2010.

The ICE numbers aren’t complete accounts, but they met the traditional definition of “commercial” copyright infringement that justified the criminal charge (US District Court Case # 10-2822). What they don’t do is describe a very lucrative or, in any other respects, criminal business.

This is a point we’ve made repeatedly regarding the incentives for criminal involvement in piracy. We see little evidence that there’s much money to be made from it—especially as the costs of setting up and running such sites decline. It’s very likely that the larger sites generate significant revenues from advertising—indeed even in the torrent admin community (see below) it’s assumed that the handful of top sites generate six and even seven-figure revenues annually. But at any given time there are only a few such sites. And even accepting the IFPI estimates, it’s chickenfeed. The top 5 pirated films, for comparison made $2 billion last year. The (non-overlapping) top 5 grossing movies made nearly $5 billion. Piracy generates an overwhelmingly consumer, not criminal, surplus.

It’s easy to see how Kim Dotcom got rich by being an early entrant in the cloud storage market, in the only part of the business that required a lot of large file transfers. (Much the same is true of broadband adoption, for which piracy has always been the early killer app—especially outside the US where legal web services are still underdeveloped.)

As a subscription business selling a scarce commodity, Megaupload’s revenues were many times larger than the largest torrent or link sites. In 2010, execs at Paramount Pictures estimated (in testimony to Congress) its profits at between $41 million and $300 million per year, with the range reflecting different assumptions about its subscription rate. The Justice Department’s recent indictment put the number below the low end of the range—committing to only $175 million in total revenues since 2005–under $30 million/year–and reflecting a roughly 7-1 split between subscriptions and advertising. There are no estimates of how much of this came from legal sources.

In contrast, it’s hard to see how this model remains lucrative. Storage costs are falling rapidly, and there are no barriers to entry or significant network effects. For a comparable market, look to the highly competitive web hosting business rather than search engines or operating systems, which have more characteristics of natural monopolies. Many companies–including Megaupload–already give large amounts of storage away. Many compete for “premium” users, either with inducements or bundling with other services.

The sum of Megaupload’s activities may well satisfy a court that it encouraged large-scale copyright infringement, and therefore should be held liable. But Megaupload’s survival is not the main concern: it’s what happens when all storage is mirrored in the cloud. It’s whether we’ll monitor and police the core features of the web: storage, linking, and search.

The Torrent Admins Survey

Now that the nerds have (provisionally) won the argument that DNS blocking could break the Internet, attention will turn to “follow the money” enforcement strategies—especially those targeting advertising and payment systems. We might ask, in this context, what “follow the money” looks like in a sector where there are few barriers to entry and costs are falling toward zero?

To find out more, we prepared a short survey of torrent site administrators, which was circulated through torrent admin lists and IRC channels by some trusted intermediaries. We received 11 responses to our survey—most of them anonymous; most of them ‘vouched for’ by our partners; and most of them anonymized through various services. We neither asked for nor received identifying information. This is, in other words, a small sample with some big caveats (such as selection bias). Nonetheless, the responses tell an interesting story.

Responses came from a pretty wide spectrum of sites, including:

• 2 that receive over 10 million visits per month
• 2 that receive 2-10 million visits per month
• 2 that receive 500,000 – 2 million visits per month
• 2 that receive 25,000-100,000 visits per month
• 2 that receive less than 25,000 visits per month.
• 1 that did not specify traffic

To provide some reference points, the two current largest torrent sites—the Pirate Bay and Torrentz—receive roughly 88 million visits/month and 46 million visits/month respectively (according to Google Adwords. There are claims that this significantly undershoots traffic on those sites.) Although cyberlocker sites like Megaupload and Mediafire now outdraw torrent sites by a wide margin, the latter remain a good indicator of the cost structure—and costs of entry—of large scale file sharing. BitTorrent is now a thoroughly commoditized technology, running on low cost hardware with freely available software. Cyberlockers are slightly further behind.

How much does running a torrent site cost? The largest site in our survey, with over 10 million visits per month, was also the most expensive. It reported server and bandwidth costs of $25,000-$30,000 per year. Most of the sites operate on less than $10,000 per year. A couple of the smaller ones were under $3,000.

How much money do these sites make, and how? Of the eleven responses, only the largest site used advertising. It reported a roughly break-even operation, with costs covered in most months by advertising. The other ten do not use advertising. These are typically the smaller, private trackers that require invitations to join—a category that nonetheless reaches into the millions of visits per month.

Eight indicated that they meet the majority of their expenses through member donations. Only one indicated that it fully met expenses this way. Only one earned additional income through affiliate links. The balance typically comes out of the pockets of the site administrators.

Although we received less information on staffing, several indicated that they operated entirely with volunteer labor—in a couple cases involving communities of a dozen or more administrators. This is the norm among smaller, private sites.

The picture that emerges from the survey is one of financially fragile but low cost operations, dependent on volunteer labor, subsidized by users and founders, and characterized by a strong sense of mission to make work more widely available within fan communities. Few such sites make or seek to make money. Many are specialized communities exchanging media of particular types, genres, or languages. A site like NinjaVideo began this way, but grew into a larger, revenue-making operation.

Rights holder pressure on payment systems is not new, but it has been ad hoc. Credit card companies were enlisted in the mid 2000s, when the record industry group IFPI waged war against the (nominally legal) Russian pay-download site AllofMP3. Industry threats against safe harbor provisions for payment providers played an important role in this process. No payment provider wants to tangle with industry lawyers on behalf of an accused infringing site, even if there is no legal basis for cutting off service. Few accused sites are able to lawyer up to respond. Strict legality doesn’t make much difference in such contexts. One site administrator showed us a letter from a payment provider terminating service based on a DMCA complaint—a law that makes no such provisions.

SOPA and PIPA legalize these strategies and make them much easier to use. Under SOPA, rights holders gain a strong right of “private action” that allows them to issue cut off letters directly to advertising services and payment systems. The latter must cut off service or face secondary liability for infringement. Under SOPA, moreover, neither the payment system nor the rights holder is liable for damages from any mistaken or overly broad actions. The “safe harbor,” under these circumstances, is repurposed to empower the complainant rather than the user.

Independent of the potential for collateral damage, SOPA and PIPA are best understood as collections of harassment measures for pirate sites, rather than any sort of “solution” to piracy. A loss of advertising revenue would harm some file sharing sites—especially the larger, more public sites that have grown into advertising-dependent commercial operations. The loss of primary payment systems such as PayPal would complicate life for the smaller torrent sites, but wouldn’t cut off revenues: there are many ways to manage the modest donation systems that keep these sites in business.

Some parts of the file sharing ecology, consequently would be vulnerable to payment system attacks. But the overall impact is likely to be low. Much of the file sharing ecology already operates at very low cost, on minimal revenue. Much of the labor is volunteer—with advertising and the “professionalization” of staff a matter of choice rather than necessity. And infrastructure costs are falling.

We talk about the efficacy of enforcement at some length in our Media Piracy report. Many readers have concluded that enforcement doesn’t work. But that isn’t what we say. We say, rather, that we’ve found no evidence that it has worked. The main factors shaping piracy are price, income, and the declining cost of technology–and that will remain the case. But it seems entirely possible that some impact can be bought at a high enough price. The numerous critiques of SOPA and PIPA provide a good idea of that price—a broken, arbitrary, copyright surveillance regime and an Internet culture reorganized around the established content providers.

The Commercial Scale Standard

In most national copyright laws, criminal law applies only to copyright infringement on a “commercial” scale. Traditionally, commercial scale referred not to the number of copies made, but to financial benefit derived from it. (Infringement that doesn’t meet the criminal standard can still be addressed through civil law, as tens of thousands of file sharers in the US and Europe have learned.) In the past 15 years, digital technologies made a mess of this distinction. When copying was capital intensive and required a factory, scale and profit went together. But in an era of ever cheaper copies and storage, the two are delinked. What to do, then, with the commercial standard?

The US response in the 1997 NET Act was to expand the definition of commercial infringement to include the unauthorized digital receipt of anything of value, subject to an exemption up to $1000. Without the for-profit requirement, the door opened—in theory—to criminal prosecution of a much wider array of participants in file sharing. The exchange of a bunch of albums or a few copies of software can easily qualify. In practice, the NET Act has been applied not to consumer-level sharing, but to intermediaries—initially members of mostly non-commercial “warez” groups engaged in cracking software, and more recently to marginally commercial intermediaries like Hana Beshara and Brian McCarthy. (The expanded criminal model is also being exported abroad without the de minimis exceptions, through trade agreements and new enforcement treaties like ACTA).

In our view, this is a bad way to resolve the confusion around the commercial standard. It dramatically expands criminal liability without any corresponding intention of enforcing it. Law enforcement, under such circumstances, becomes arbitrary and easily captured by private parties. Industry lobbying secures funding for enforcement agencies and enforcement agencies return the favor, turning to stakeholders for staffing, planning, and cost sharing. Personnel flows between the two, anchored in the understanding that government service is rewarded later in the private sector.

The US Attorney leading the Megaupload case, for example, is Neil MacBride, former head of enforcement for the Business Software Alliance. The Obama transition brought at least five RIAA lawyers to the Department of Justice. The Megaupload indictment, both in its tone and its kitchen sink approach to infringement, could have been written by the MPAA. The distinction has become a formality.

So what to do? As long as we have a culture organized around copyright, there should be ways to define and police violations of it. But our current definitions needs a rethink. There is ample reason to see unauthorized copying and file-sharing as inevitable in the digital era and more–as inextricable from the core features of general computing and the Internet. The law should recognize this because doing so protects the wider set of freedoms to express and innovate that build on those features. Both individuals and companies should be accorded wide latitude in their use. That said, there is no reason to defend piracy as a profit-making activity.

So one place to start might be to ditch the NET Act and SOPA and restore a narrower commercial scale standard for criminal infringement, along with a less draconian set of penalties for the times when it is invoked. Such a standard would make profit the trigger, and make that the basis for any follow-the-money actions against payment systems or advertisers. This bar could be set high enough to exempt the marginal member-subsidized torrent sites, since these are little more than group implementations of search, store, and link–the building blocks of the web. They cost little today and less tomorrow.

But the bar could also be low enough to encompass sites that start to generate a lot of money. Drawing such distinctions could help restore a useful middle ground—retaining a threshold for enforcement while rejecting both the universal liability envisioned in the Net Act and the universal surveillance implied in SOPA. It would better align the law with the actual capabilities of law enforcement to enforce, and thereby make enforcement less arbitrary. And it would help articulate a much wider zone of personal freedom to copy, based on a recognition of the wider importance of unhindered, unmonitored use the core capacities of the web.

A reinvigorated commercial standard won’t end piracy. Nothing short of a copyright surveillance state would, to any significant degree. But the commercial standard would help drive file sharing into the non-commercial economy, leaving more room for creative, legal, low-cost commercial alternatives. That’s not a sufficient definition of copyright reform, but it may be a necessary step if we’re to bring law into line with the basic economics of our digital culture. The law can’t eliminate piracy, but it can help make it irrelevant.

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Addendum: Regarding the monetary harm of Megaupload’s activities, the Justice Department characterized it, without explanation, as “well in excess of $500,000,000” since 2006. And although that number is probably meant to impress, it’s somewhat baffling. Even without a per annum breakdown, it comes nowhere near the annual piracy losses claimed by the major industry groups—whether the BSA’s $58 billion loss claims for software losses in 2010 or the “conservative” $26 billion estimate for movie, music, and software piracy from 2007, which lazy journalists still allow to circulate. This for the site that MPAA called “By all estimates… the largest and most active criminally operated website targeting creative content in the world.”

Since we’re using made up numbers here, let’s make up some more–and for the sake of argument, some extremely favorable ones for the Justice Department’s effort to paint Megaupload as the big bad. Posit that all $500 million in losses came in 2011. Posit the $26 billion loss number. Megaupload’s contribution to the pirate economy tops out at 2%.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.

According to comments originally made in the print version of Politiken, RettighedsAlliancen have sent an urgent demand to the Danish “bailiff court” (known locally as Fogedretten) to have the country’s Internet service providers block US-based streaming music service Grooveshark.

“When you want to offer music on the Danish market, one must have an agreement with rightholders to do so. Grooveshark does not and has been completely uncooperative,” explained RettighedsAlliancen chief Maria Fredenslund.

In recent years access to authorized streaming services such as Spotify has increased for Danes, says Fredenslund, so now is the time to give those types of companies protection.

“There is a burgeoning market for online music that we believe it is necessary to support. We are in a situation where the market will die if Grooveshark continues,” she adds.

Previously other sites have been blocked on copyright infringement grounds in Denmark including AllofMP3 and more recently The Pirate Bay, but the situation with Grooveshark is more complex. Since sites like TPB do not honor DMCA-style takedown requests, arguing that they should be blocked becomes a greatly simplified process. For Grooveshark the situation is much more complex.

Senior VP of Information Products at Grooveshark, Paul Geller, is on record stating that “there is nothing illegal” about Grooveshark since like its video counterpart YouTube, by responding to takedown notices it enjoys Safe Harbor under the DMCA.

Rightsholders in Denmark, however, say they don’t have the patience to deal with the process and that taking down content effectively from Grooveshark has proved impossible. Just like the RIAA, they suggest that the DMCA swings too far in favor of service providers, and official label licensing is required for a service to be considered legitimate. (Grooveshark is in fact licensed by EMI and dozens of other labels)

Nevertheless, Geller’s position on takedowns is widely supported. Piratgruppen spokesman Troels Møller describes this new move against Grooveshark as “censorship.”

“Grooveshark reacts to takedown notices, but that is not good enough for the copyright industry – they want complete control,” Troels told TorrentFreak. “And I can see why since Spotify, partially owned by the record companies, was just launched in Denmark. It is a very convenient time to get rid of the competition.”

“Denmark is becoming a censoring state, much like Syria, Tunisia, China, etc. They are effectively destroying the internet. It’s becoming less and less neutral and free,” Troels adds. “Luckily they are only using DNS-blocking so far, which can be easily circumvented.”

Troels, who is also co-founder of
internet think tank Bitbureauet, is concerned that should a block against Grooveshark be approved, it would set a worryingly low blocking threshold for other sites in the future.

“If the same logic is applied throughout the internet, the next logical step would be to block Facebook, YouTube, Soundcloud and similar sites, which also host potentially infringing material until notified,” he concludes.

Jakob Willer of the Telecommunications Industry Association of Denmark says it’s not for his group or the ISPs to decide whether Grooveshark is legal, but hopes the service will get a chance to defend itself.

“I hope that Grooveshark will be consulted in the process because they are the ones who where applicable, will be barred,” Willer concludes.

Grooveshark’s Geller says he is unaware of any case pending against his company in Denmark.

Source: TorrentFreak, for the latest info on copyright, file-sharing and anonymous VPN services.