In the late 1700s, the United Kingdom was the empire that established laws on the globe. The United States was still largely a colony – even if not formally so, it was referred to as such in the civilized world, meaning France and the United Kingdom.

The UK had a strictly protectionist view of trade: all raw materials must come to England, and all luxury goods must be made from those materials while in the UK, to be exported to the rest of the world. Long story short, the UK was where the value was to be created.

Laws were written to lock in this effect. Bringing the ability to refine materials somewhere else, the mere knowledge, was illegal. “Illegal copying”, more precisely.

Let’s look at a particularly horrible criminal from that time, Samuel Slater. In the UK, he was even known as “Slater the Traitor”. His crime was to memorize the drawings of a British textile mill, move to New York, and copy the whole of the British textile mill from memory – something very illegal. For this criminal act, building the so-called Slater Mill, he was hailed as “the father of the American Industrial Revolution” by those who would later displace the dominance of the UK – namely the United States. This copy-criminal also has a whole town named after him.

Copying brings jobs and prosperity. Copying has always brought jobs and prosperity. It is those who don’t want to compete who try to legislate a right to rest on their laurels and outlaw copying. It never works.

We can take a look at the early film industry as well. That industry was bogged down with patent monopolies from one of the worst monopolists through industrial history, Thomas Edison and his Western Electric. He essentially killed off any film company that started in or at New York, where the film industry was based at the time. A few of the nascent film companies – Warner Brothers, Universal Pictures, MGM – therefore chose to settle as far from this monopolist as possible, and went across the entire country, to a small unexploited suburb outside of Los Angeles, California, which was known as “Hollywoodland” and had a huge sign to that effect. There, they would be safe from Edison’s patent enforcement, merely through taking out enough distance between themselves and him.

Yes, you read that right – the entire modern film industry was founded on piracy. Which, again, lead to jobs and prosperity.

The heart of the problem is this: those who decide what is “illegal” to copy do so from a basis of not wanting to get outcompeted, and never from any kind of moral high ground. It’s just pure industrial protectionism. Neo-mercantilism, if you prefer. Copying always brings jobs and prosperity. Therefore, voluntarily agreeing to the terms of the incumbent industries, terms which are specifically written to keep everybody else unprosperous, is astoundingly bad business and policy.

I’d happily go as far as to say there is a moral imperative to disobey any laws against copying. History will always put you in the right, as was the case with Samuel Slater, for example.

For a more modern example, you have Japan. When I grew up in the 1980s, Japanese industry was known for cheap knock-off goods. They copied everything shamelessly, and never got quality right. But they knew something that the West didn’t: copying brings prosperity. When you copy well enough, you learn at a staggering pace, and you eventually come out as the R&D leader, the innovation leader, building on that incremental innovation you initially copied. Today, Japan builds the best quality stuff available in any category.

The Japanese knew and understand that it takes three generations of copying and an enormous work discipline to become the best in the world in any industry. Recently, to my huge astonishment, they even overtook the Scottish as masters of whisky. (As I am a very avid fan of Scottish whisky, this was a personal source of confusion for me, even though I know things work this way on a rational level.)

At the personal level, pretty much every good software developer I know learned their craft by copying other people’s code. Copying brings prosperity at the national and the individual levels. Those who would seek to outlaw it, or obey such unjust bans against copying, have no moral high ground whatsoever – and frankly, I think people who voluntarily choose to obey such unjust laws deserve to stay unprosperous, and fall with their incumbent master when that time comes.

Nobody ever took the lead by voluntarily walking behind somebody else, after all. The rest of us copy, share, and innovate, and we wait for nobody who tries to legislate their way to competitiveness.

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

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The Australian Government recently called for submissions into its plans to introduce a range of measures that are the long-standing dreams of the copyright lobby: ISP liability, website blocking for alleged pirate sites and graduated response.

The Government’s discussion paper specifically asked respondents to ignore other Government inquiries into copyright. This meant ignoring an inquiry by the Australian Law Reform Commission (ALRC) into copyright in the digital economy and an IT pricing inquiry. These reviews both covered important aspects of sharing culture in the 21^st century, yet they were completely ignored by the Government’s paper and respondents were instructed to ignore issues covered in them.

The ALRC review examined issues around the emerging remix culture, the ways the Australian copyright regime limits options for companies to take advantage of the digital environment and issues around fair dealing and fair use. It recommended a raft of changes to update Australian copyright law to modernize it for the digital age. Whilst the recommendations were modest, they were a step in the right direction, but this step has been ignored by the Australian Parliament.

The IT pricing inquiry held last year, looked into why Australians pay exorbitant prices for digital content, a practice that has been dubbed the Australia Tax. Entertainment and Tech companies were dragged in front of the inquiry to explain why Australians pay much more for products than residents of other countries. The review found that, compared to other countries, Australians pay up to 84% more for games, 52% more for music and 50% more for professional software than comparable countries. The result of this review was to look at ways to end geographic segmentation and to continue to turn a blind eye to people using Virtual Private Networks (VPNs) to circumvent the higher prices in Australia.

Between the Australia Tax and the substantially delayed release dates for TV shows and movies, Australians don’t feel too bad about accessing content by other means. According to some estimates, over 200,000 people have Netflix accounts by accessing the service through VPNs.

Pirate Party Australia (PPAU) responded to the latest review with a comprehensive paper, outlining the need to consider all of the evidence and what that evidence says about file-sharing.

To say the Government’s discussion paper was biased understates the single-mindedness of the approach being taken by the Government. A co-author of the Pirate Party submission, Mozart Olbrycht-Palmer summed it up:

The discussion paper stands out as the worst I have ever read. The Government has proposed both a graduated response scheme and website blockades without offering any evidence that either of these work. Unsurprisingly the only study the discussion paper references was commissioned by the copyright lobby and claims Australia has a high level of online copyright infringement. This calls into question the validity of the consultation process. The Government could not have arrived at these proposals if independent studies and reports had been consulted.

The entire review was aimed at protecting old media empires from the Internet. This is due in part, to the massive support given to the Liberal (Conservatives) and National Party coalition in the lead-up to the 2013 federal election which saw Murdoch owned News Ltd media, comprising most major print-news outlets in Australia, actively campaign for the in-coming Government. There is also a long history of media companies donating heavily to buy influence. Village Roadshow, one of Australia’s largest media conglomerates, has donated close to four million dollars to both major parties since 1998: in the lead up to the 2013 election alone, they donated over $300,000 to the LNP.

The sort of influence being wielded by the old media is a big part of what Pirate parties worldwide were formed to counter. The Internet gives everyone a platform that can reach millions, if the content is good enough. The money required to distribute culture is rapidly approaching zero and those who built media empires on mechanical distribution models (you know, physical copies of media, DVDs, cassettes etc) want to turn the clock back, because they are losing their power to influence society.

Much of the Pirate Party response centred on the need to allow non-commercial file-sharing and dealing with the wrong, bordering on fraudulent assumptions, the paper was based on. From the paper:

Digital communications provide challenges and opportunities. Normal interactions, such as sharing culture via the Internet, should not be threatened. Creators should seize the new opportunities provided and embrace new forms of exposure and distribution. The Pirate Party believes the law should account for the realities of this continually emerging paradigm by reducing copyright duration, promoting the remixing and reuse of existing content, and legalising all forms of non-commercial use and distribution of copyrighted materials.

The discussion paper asked, ‘What could constitute ‘reasonable steps’ for ISPs to prevent or avoid copyright infringement?’ This was of particular concern because it is aimed at legally overturning the iiNet case, which set a legal precedent that ISPs couldn’t be sued for the behavior of their users. This section was a not-so-subtle attempt to push for a graduated response (‘three strikes’) system which has been heavily criticized in a number of countries.

The agenda laid out in this discussion paper was very clear, as demonstrated by Question 6: “What matters should the Court consider when determining whether to grant an injunction to block access to a particular website?”

The Pirate Party obviously disagrees with the implication that website blocking was a foregone conclusion. Censorship is not the answer to file-sharing or any other perceived problem on the Internet. Government control of the flow of information is not consistent with an open democracy. The Pirate Party submission attacked website blocking on free speech grounds and explained how measures to block websites or implement a graduated response regime would be trivial to avoid through the use of VPNs.

On Tuesday September 9, a public forum was held into the proposed changes. The panel was stacked with industry lobbyists, no evidence was presented while the same tired arguments were trotted out to try to convince attendees that there was need to crack down on file-sharing. It wasn’t all bad though, with the host of the meeting, Communications Minister Malcolm Turnbull, flagging a Government re-think on how to tackle piracy after the scathing responses to the review from the public.

Despite signalling a re-think, the Australian Government is still intent on implementing draconian copyright laws. Consumers may have won this round, but the fight will continue.

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

As the founder of Parliament’s Rock the House competition and member of the All-Party Parliamentary Intellectual Property Group launched in 2003 to raise awareness and rally against copyright and related infringement, Weatherley seemed like the ideal candidate.

The then 56-year-old quickly offered his support to the recently formed Police Intellectual Property Crime Unit and promised to assist the government to focus on anti-piracy enforcement issues aimed at protecting the creative industries.

By December of 2013, Weatherley was making it clear that ISPs should be held responsible for their customers’ infringing downloads and just weeks later suggested jail sentences for persistent file-sharers. Greater accountability for companies such as Google became a recurring theme in the MP’s work.

But while Weatherley has made quite an impact in his unpaid position, his role as a Conservative Member of Parliament will come to an end in the first quarter of 2015. In an announcement today Weatherley confirmed that he will not be standing at next year’s General Election.

Noting the enjoyment he’s had serving the people of his constituency in the south of England, Weatherley also touched on his role as Cameron’s IP advisor.

“Over the past year, I have taken immense pride in serving as your Intellectual Property Adviser. I am sure that you will agree that we have made huge steps towards really getting politicians and industry talking – which is key to making the most of our country’s wealth of creative talent,” the MP told the Prime Minister.

If Weatherley keeps to his own predictions then he will step down as an MP before May 2015 but he also hints that he would like to remain involved in government IP matters.

“It would be a privilege to continue offering my assistance in this regard,” he told David Cameron.

Interestingly, local media is reporting that Weatherley is believed to be returning to the creative industries. The 57-year-old was formerly the European vice-president of the Motion Picture Licensing Company and also worked as the finance director of record producer Pete Waterman’s empire.

A revolving door situation, where Weatherley heads out of government into a position with a large entertainment group, hardly seems out of the question given his history, but for solid information the world will have to wait. In the meantime his work in government will continue, with some of his time devoted to the industry he’ll soon be re-joining.

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

The pre-trial mechanism allows for the imposition of so-called “preliminary interim measures” should the sites in question fail to remove or block infringing content in a timely fashion. These can include a court ordered service provider blockade of specific URLs.

The process has been used dozens of times during the past ten months or so. Earlier this month the Moscow City Court took action to restrict the availability of 15 TV shows illegally posted online including Game of Thrones, Breaking Bad, True Blood and American Horror Story. Several torrent site URLs were ordered to be blocked by ISPs, including those on the popular RuTor.org.

Now, just a week later, the local exclusive rightsholder of the above shows plus others including Boardwalk Empire, True Detective, Homeland, Girls and True Blood, wants to have its content completely blocked on a wide range of sites.

The case is being brought by “A Series” and will begin in the Moscow City Court next month. According to Rapsinews, July 10 has been set aside for pre-trial preparations and to clarify the requirements of the parties, including a call for evidence and addressing other issues relevant to the forthcoming trial.

The lawsuit will target more than a dozen sites and BitTorrent trackers including rutor.org, lostfilm.tv, bigcinema.tv and gamethrones.ru, most of which have been targeted in previous actions.

News of the lawsuit arrives following the announcement of an agreement between the Ministry of Communications and the Ministry of Culture to beef up the law introduced last year. A source inside the government told Izvestia that the text of a new anti-piracy bill has been finalized and will be submitted to the Duma in the near future.

While the law’s new stricter provisions will be welcomed by rightsholders, the music industry will again be disappointed. Movies and TV shows are covered by current law, but music is not, and the package of amendments about to be presented will not see the introduction of music protection until 2016.

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

Perhaps one of the less offensive approaches from by the industry has been to try and educate people away from unauthorized music consumption. It’s hard to say whether that has had any effect either but today they’re having another go, with the release of a new app for iOS and Android.

Music Inc., a collaboration between industry group UK Music and the Intellectual Property Office, puts the player in the role of a manager seeking to build a music empire. From humble bedroom beginnings, the player is first required to take on an unsigned artist.

From the start it becomes clear that this game will be all about managing money. With just £1,000 to launch the business, the player has a choice of spending anywhere from £100 for an artist with 150 fans to £700 for one with 500. Each artist has a rank for artistry, charisma and motivation. We selected a ‘Grime Rock’ band called Parachute for a £500 advance and prepared to serve their 750 fans.

From there it was straight into the studio to lay down some beats, either by letting the band create their own music or teaming them up with another perhaps-more-well-known artist in order to get noticed more easily. This latter option costs more money, obviously.

Composing a song is as simple as pressing a button and waiting for four dials to spin round. When they’re done you can release the song, with toggles for whether the track should go out on physical (CD presumably, expensive), download or streaming (zero cost), or any combination of the three.

At this point a graph starts to plot sales – and pirate downloads – followed by an apparently persistent message that Parachute’s song hadn’t made the charts. Spending available money on PR didn’t seem to help much, neither did playing a festival. Hopefully spending more money later in the game would change that.

Throughout 40 mins or so of playing, piracy rates drifted between the 29% to 34% marks, a far cry from the 90%+ claims of the real-life music industry. Choosing a streaming-only release did boost piracy rates to around 37% but that didn’t feel too bad when placed along the joy of having one of the band’s songs featured in a department store’s Christmas advert. However, this was quickly followed by the first big in-game piracy event.

Apparently Parachute’s music had been made available on a big file-sharing site, something which upset the band quite a bit and saddened the fans due to the copies being of bad quality. Did I want to invest £2,500 in an anti-piracy campaign to stop my little cash cow leaking money to pirates? YOU BET!

Excited by the prospect of having defeated piracy, I got Parachute to release a new song straight after the campaign had finished and eagerly watched the sales stats come in. Sadly the campaign had been poor value for money and piracy rates were still at roughly 30%.

But then, out of nowhere, more good news! Following some high-profile legal cases and prosecutions of file-sharers a temporary downturn in piracy was reported. Time to get another song out, obviously. Done. Piracy rate = just over 31%.

Desperate to escape the pirate scourge and the humdrum of bedroom life I invested in a fancy studio. Sadly this only got me in debt with the bank and with mediocre sales things were looking bad. Then the band got “overtired” from attending too many premieres and parties and lost motivation to record more songs. Great.

In debt with the bank I couldn’t afford any more CD releases and had to go exclusively with the download and streaming options, which brought in hardly any money for the band’s (in)appropriately titled swan-song “Gilded Smegma”. And with piracy at a persistent 30%, I quickly realized that not only was the music industry not for me, but I had also grown tired of the game.

Music Inc. is well presented, graphically neat and may yet turn up some excitement in the later stages of the game. There may also be a deeper element to the game strategy that a 45 minute play through failed to release, so you should head over to the App Store and Google Play and give it a try just to be sure.

However, as a vehicle for explaining about the effects of piracy, everything felt pretty random. Different strategies failed to affect infringement in any significant way, leaving the player with the feeling that nothing much could be done about it. Of course, it is entirely possible that was the idea…..

But the real shame here is that an opportunity has been lost to promote what this app should really be about. This app was created by UK Music, the group that represents the interests of the UK music industry. But aside from the odd click and a bleep, the app is entirely silent, totally disconnecting the player from the product they’re supposed to be supporting.

The industry is often criticized for thinking too much about the money and not enough about the artists and the music. This app only reinforces that.

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

Conservative MP Mike Weatherley, a former record label worker and Vice President of the Motion Picture Licensing Company, began with a brief to focus on intellectual property enforcement issues relating to the creative industries.

With the appointment of Weatherley, a chartered accountant and former finance director of record producer Pete Waterman’s empire, there can be little doubt that the Government is looking to tighten things up on the IP front.

Writing for the World Intellectual Property Organization magazine, the 56-year-old says that he faces a key question of whether the solution to the piracy problem requires government and/or industry involvement, or a partnership of the two.

Weatherley begins by touching on the complex issue of content licensing and the domestic issues raised by the Hargreaves Review. However, he soon moves on to what many believe is one of the main drivers of infringement over the past decade – a failure by content distributors to move forward with technology.

“At the end of the day, the creative industry must take responsibility for its failure to keep pace with the digital age. Technology will always open up new ways to access content. If creators do not begin to embrace these technologies they will lose out, and by default, the market will be dictated by ‘open rights’ interest groups. The creative industry alone is responsible for not evolving fast enough. The music industry, for example, has spent years saying ‘no’ instead of ‘how?’,” Weatherley says.

Interestingly, the MP also says that the creative industries are very good at talking to themselves but notes they are doing little to educate the public and are even “losing the propaganda war.”

“In 2010, at the UN Worldwide Internet Governance Forum in Vilnius (Lithuania) it was shocking to see that no one from either industry or government was present to make a case for supporting the protection of IP rights. The Pirate Party, however, was there in full force arguing that all content should be made available for free,” Weatherley notes.

Echoing growing sentiments of many in the digital domain, the MP says that the “efficient and plausible way forward” would see the industry not only educating consumers but meeting their demands by offering “simple, affordable and legal access” to copyright-protected works.

“Proponents of piracy say downloading content legally is too complicated. Industry, therefore, needs to find innovative ways to ensure that content is easily available and in so doing make piracy a less attractive option. We need to let go of old dogma and identify and further develop new, workable solutions, Weatherley says.

But what if education plus fresh and innovative offerings can’t do the job of seriously reducing copyright infringement? Legislation can, it seems.

“Government must back up industry by putting the necessary enforcement mechanisms into place. This would include holding Internet Service Providers responsible if they knowingly facilitate illegal downloading practices and do not take steps to stop this form of piracy,” the MP states.

The issue of liability for third-party infringement has been well-trodden in the past 12 months, with both the music and movie industries taking the leading ISPs to the High Court in order to hold them responsible for the unauthorized file-sharing of their customers.

The evidence of subscriber infringement on sites such as The Pirate Bay is now considered enough to put ISPs on notice that they need to block sites to stop it. The big question now is what Weatherley envisions on the legislative front that isn’t already covered.

Will ISPs be expected to warn and disconnect infringing customers in order to maintain their safe harbor? Or perhaps actively blocking a wider range of sites once wide-scale infringement is established will be acceptable? A combination of the two might seal the deal but all options are very much political hot potatoes.

Time will tell, but in the meantime Weatherley signs off with a note to the industry.

“The creative sector needs to show greater flexibility and to be part of the solution,” he concludes.

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

The success and controversy surrounding Megaupload as well as Dotcom’s personal life in the years leading up to the raid are now detailed in a biography.

Written by David Fisher, “The Secret Life of Kim Dotcom – Spies, Lies and the War for the Internet” reveals intimate family details, but it also provides additional details on Dotcom’s perception of the Megaupload raid, and how the entertainment industry dealt with the site before it was taken down.

Some of these details are being published for the first time, including Kim Dotcom’s suspicions that his support for Wikileaks was one of the main reasons for the U.S. Government to go after him.

In the book Dotcom explains that he donated €20,000 to Wikileaks after the Collateral Murder video came out early 2010. It’s a controversial allegation, but Dotcom believes that it is no coincidence that the prosecutor who investigated Julian Assange was also appointed to the Megaupload case.

The passage below is taken directly from the book, with permission from the publisher.

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Dotcom believes one of the reasons he was targeted was his support for Wikileaks founder Julian Assange. He says he was compelled to reach out to the site after US soldier Bradley Manning leaked documents to it. The infamous video recording of the Apache gunship gunning down a group of Iraqis (some of whom, despite widespread belief to the contrary, were later revealed to have been armed), including two Reuters journalists, was the trigger.

“Wow, this is really crazy,” Dotcom recalls thinking, watching the black-and-white footage and hearing the operators of the helicopter chat about firing on the group. He made a €20,000 donation to Wikileaks through Megaupload’s UK account. “That was one of the largest donations they got,” he says. According to Dotcom, the US, at the time, was monitoring Wikileaks and trying better to understand its support base. “My name must have popped right up.”

The combination of a leaking culture and a website dedicated to producing leaked material would horrify the US government, he says. A willing leaker and a platform on which to do it was “their biggest enemy and their biggest fear . . . If you are in a corrupt government and you know how much fishy stuff is going on in the background, to you, that is the biggest threat — to have a site where people can anonymously submit documents.”

Neil MacBride was appointed to the Wikileaks case, meaning Dotcom shares prosecutors with Assange. “I think the Wikileaks connection got me on the radar.”

Dotcom believes the US was most scared of the threat of inspiration Wikileaks posed. He also believes it shows just how many secrets the US has hidden from the public and the rest of the world. “That’s why they are going after that so hard. Only a full transparent government will have no corruption and no back door deals or secret organisations or secret agreements. The US is the complete opposite of that. It is really difficult to get any information in the US, so whistleblowing is the one way you can get to information and provide information to the public.”

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The book doesn’t offer more details to substantiate Dotcom’s claims, but it’s clear that the New Zealand entrepreneur sees Megaupload’s takedown as more than just “a favor” to Hollywood and the major record labels.

In addition to the Wikileaks angle the book also describes tense pre-raid relationships between Megaupload and various copyright holders. As Dotcom previously told TorrentFreak, several players in the entertainment industry, including Disney, were eager to partner with the file-sharing empire.

On the other hand, however, the major record labels and Hollywood also actively frustrated attempts by Dotcom to license content for his Megabox and Megamovie ventures. The passage below describes the tense relationship in detail.

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While Hollywood executives railed against the company in public, they were privately finding ways to engage with the business. There were emails from studios, looking for ways to work with Megaupload that would see their content hosted on the website. “Disney proposed to us a contract of co-operation where there were some conditions in there we simply couldn’t accept. They wanted to use us as a distribution platform (but) they just had completely bizarre ideas of how that would work. They would basically take control of the whole process.”

Ideas from the studios included allowing old or little-known new content to find its own life on Megaupload. The old content could be linked to new content which would be paid for, while new artists with low public profile would be able to build a fan base through viral appeal. “For us it was bizarre, on the one hand, they were like wanting to do something with us and being nice and thanking us for all the co-operation. You would never think they would go and try and start criminal action against us.”

Dotcom said he struggled to understand why Hollywood and the record Industry Association of America spent so much effort on attack when there were easier ways to manage the evolution of copyright on the internet. An outlay of up to $2 million would fund the development of a call centre — he suggested India or the Philippines. “You employ say 50 to 100 people, and you train them to look for infringing links all over the internet.” The centre would develop search skills ranging from the ubiquitous google to sites dedicated to infringing content. He said with the funding of “a relatively small investment” and the use of available tools like the Digital Millennium copyright Act “they could have sorted this piracy problem out”.

In the months leading up to the destruction of Megaupload, there was a growing friction between it and the copyright industry. Megaupload was bigger and bolder than ever, talking of new business plans which cut across territory considered by the copyright industry to be traditionally theirs. One of those ventures was MegaMovie, intended to be an online database of films. There was also MegaBox, the proposed music site which would allow users to buy tracks from popular artists — but also allow artists to sell directly to the public.

“I was having meetings with Hollywood producers trying to establish communication and trying to work with them. I wanted to license content for MegaBox from the music labels.”For each move Dotcom made, the copyright industry would make another to head him off. When Megaupload agreed a deal with a company which held the database of cover art for CDs, the deal was sunk by the recording industry. “They stopped us from becoming a proper licensor of their content and their cover art. They didn’t even allow us to become a partner.”

While Hollywood was keeping the eager Mega team at arm’s length, Dotcom could only see common sense in some sort of deal. He wanted to turn the infringing links into an opportunity to make money, diverting traffic attempting to download infringing material to an MPAA-approved website where they could buy it. “We had great ideas for them,” said Dotcom. “So let’s say Hollywood identifies the Terminator 2 movie. Their team has taken it down from Megaupload. By providing us with a content ID . . . we know what it was and we link to the site where they sell it legitimately. They weren’t interested in that — can you believe that? We were going to give them so much traffic so they could sell this stuff and they didn’t do it.”

—

Perhaps one of the reasons why Hollywood and the RIAA kept Megaupload at a distance is because they knew what was coming. Not much later Megaupload was raided, effectively destroying a multi-million dollar empire.

The above are just a few highlights from the book, which is well worth a read for those who want to know more about Dotcom’s life. While the book doesn’t delve deeply into some of the more controversial issues, it is a fascinating read.

“The Secret Life of Kim Dotcom – Spies, Lies and the War for the Internet” is available for sale here, and an Ebook version is available on Amazon.

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

John Linton, chief of ISP Exetel, said that his company had been approached by US film distributor Lightning Entertainment who were demanding the identities of around 150 of the ISP’s subscribers who had allegedly downloaded the movie “Kill The Irishman”.

The front company carrying out this work are called Movie Rights Group (MRG), headed by New Zealand-born brothers Matthew Wade Clapham and Richard Dean Clapham. They and Lightning Entertainment are connected to a pornographic empire called New Frontier Media, which sparked speculation that Australia would soon be flooded with settlement requests on adult movies, as is currently happening in the United States.

Well, if that indeed happens, it appears that MRG won’t get much cooperation from John Linton’s Exetel.

In a post on his private blog (as reported by Delimiter), Linton doesn’t hold back on his feelings for these copyright trolls.

“The appearance of scum like the Movie Group [has] forced Exetel to have to consider the base ways we operate the core systems of our business, simply because we must now consider which is the greater of the evils our current society has forced us to confront,” Linton wrote.

Although MRG won’t be on Linton’s Christmas card list this year, he is careful not to endorse copyright infringements carried out by his subscribers. But this CEO has made his judgment about who deserves his company’s support.

“In this case, it is do we go out of our way to protect those of our customers who knowingly and willfully steal other people’s property or do we allow them to be exposed to even scummier elements of our society …who might be able, amazingly and disappointingly, to use the Australian court system to allow them to be blackmailed?”

So what options are there to scupper the plans of MRG? According to Linton, his company will “almost certainly” invest a serious amount of money in order to render their systems unfriendly to trolls.

“So by the end of this week copyright theft by some percentage of our customers will cost Exetel something over $200,000 to ensure blackmailing scum can’t target our law-breaking customers,” added the Exetel chief.

While it is extremely rare for an ISP to stand up for its customers so publicly, it is not unheard of. In opposition to the country’s IPRED legislation, two Swedish ISPs – Bahnhof and Tele2 – stopped logging IP addresses handed out to their customers, thus thwarting any rightsholder request for information.

However, while the Swedish ISPs are completely within their legal rights to take this action (local law doesn’t require logs to be kept) the situation in Australia is unclear. What Exetel is spending $200,000 on is yet to be revealed but whatever it is will be watched closely not only by trolls, but by U.S. rightsholders too.

Whatever “core business systems” change Exetel has in mind to scupper MRG also has the potential to neutralize both Hollywood and the recording industry. And they won’t like that, not one little bit.

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

The European Strategy: Send Money to the US

Most of the time, the international politics of intellectual property law are pretty easy to follow: countries that are large exporters of intellectual property usually favor stronger international IP agreements that help exploit international markets.  Countries that are large importers of IP, in contrast, generally favor lower levels of IP protection that minimize the outflow of royalties, licensing fees, and other payments for foreign-owned products and technologies–whether computers, drugs, movies, or books.  Whatever other rhetorics are in play, from the rights of authors to the right to development, political positions usually line up with those underlying incentives.

The turn toward the use of trade agreements to set IP obligations–from the early bilateral agreements of the 1980s to the WTO’s TRIPS agreement in the early 1990s–more or less formalized this instrumental approach to IP law.  Trade agreements, at the end of the day, are about economic deals–not morality or even fairness.  For anyone clinging to a moral interpretation of these arrangements, it’s worth revisiting at the US and EU positions in the South African AIDS drug controversy from the late 1990s or more recent opposition to the proposed WIPO treaty for the visually impaired.

I raise this not to attack trade agreements, but to ask some similarly instrumental questions about the European Commission’s position on IP rights and enforcement.  Over the past two decades, the EC has been a very active proponent of higher IP standards and stronger enforcement, from the ACTA agreement, to the upcoming revision to the Enforcement Directive, to the imminent extension of copyright on recordings (see here).  Let’s ask the obvious question: why?

Follow the Money

I’ll focus on audiovisual markets and piracy, since these are driving the EC and wider EU push on enforcement.  Media piracy–not counterfeits–are why we’re talking about major changes to the emerging digital architecture of public life, including Internet surveillance, ’3-strikes’ disconnection laws, public and private censorship of websites, and a host of other measures.

So where do the EU’s economic interests lie?  Let’s look at the numbers:

*** According to the World Bank, Europe’s audiovisual imports exceed its exports by a ratio of around 4-1.  In 2008, Europe (EU 27) imported roughly $14.7 billion in audiovisual and related services (basically, licenses for movies, TV, radio, and sound recording).  In contrast, it exported about $3.9 billion, for a net trade deficit of $10.8 billion  (International Trade Statistics 2010: 156).

*** About 56% of those imports ($8.35 billion) come from the US.  The EU, in turn, exports about $1.7 billion to the US, resulting in a net negative trade balance of around $6.65 billion.  This does not include software licenses, where US companies monopolize larger parts of the European consumer and business markets.

*** The US, in contrast, is a large net exporter of audiovisual goods, with roughly $13.6 billion in exports and $1.9 billion in imports.

For countries or regions that are net importers of copyrighted goods, higher IP standards and stronger enforcement will result in increased payments to foreign rights holders.  Because the US thoroughly dominates European audiovisual markets, stronger enforcement in these areas is, in practice, enforcement on behalf of Hollywood.

Now, one can make this story more complicated.  The vast majority of European audiovisual production is for domestic or intra-European consumption.  Exports from European countries to each other significantly outweigh exports outside the EU (by about 50%).  Won’t stronger IP laws and enforcement capture more benefits for European industry?  Probably, but these should not be confused with overall benefits to the European economy.

Here’s how we put it in our Media Piracy report:

Domestic piracy may well impose losses on specific industrial sectors, but these are not losses to the larger national economy. Within a given country [or in this case, region], the piracy of domestic goods is a transfer of income, not a loss. Money saved by consumers or businesses on CDs, DVDs, or software will not disappear but rather be spent on other things—housing, food, other entertainment, other business expenses, and so on. These expenditures, in turn, will generate tax revenue, new jobs, infrastructural investments, and the range of other goods that are typically cited in the loss column of industry analyses.

To make a case for national economic harms rather than narrower sectoral ones, the potential uses of lost revenue need to be compared: the foregone investment in the affected industries needs to represent a better potential economic outcome than the consumer surplus generated by piracy (Sanchez 2008). The net impact on the economy, properly understood, is the difference between the value of the two investments. Such comparisons lead into very complicated territory as marginal investments in different industries generate different contributions to growth and productivity. There has been no serious analysis of this issue, however, because the industry studies have ignored the consumer surplus, maintaining the fiction that domestic piracy represents an undiluted national economic loss.

For our part, we take seriously the possibility that the consumer surplus from piracy might be more productive, socially valuable, and/or job creating than additional investment in the software and media sectors. We think this likelihood increases in markets for entertainment goods, which contribute to growth but add little to productivity, and still further in countries that import most of their audiovisual goods and software—in short, virtually everywhere outside the United States.

The EC clearly speaks for the European audiovisual industries on these issues, who stand, in theory, to gain from stronger IP enforcement (or maybe not!).  But who speaks for the massive and very real consumer surplus?  No one.  I’m aware of only one study that makes any effort to model it: the Dutch government funded “Ups and Downs: Economic and Cultural Effects of File Sharing on Music, Film and Games,” which estimated the annual welfare benefit from music filesharing in the Netherlands at around 100 million euros.  Multiply by 30 for a very crude extrapolation of this benefit across the EU.

Whose Piracy is It?

But to what extent does piracy actually impact European movies?  For better and for worse, the answer appears to be: very little.  Ernesto at TorrentFreak  regularly compiles lists of the top ten films downloaded via BitTorrent, which generally track recent Hollywood hits.  He generously furnished me a ranking of the 99 top downloaded movies for the first half of July (99 because the top 100 included Thor under two different titles).  Although not a rigorous sample, I’d suggest that it is  a decent proxy for the global demand for film.  Among these 99 films:

*** 74 were solely US productions
*** 3 were solely European productions
*** 3 were Indian productions
*** 17 were jointly produced by the US and one or more other countries, including 14 with European companies.
*** UK production companies were solely responsible for 2 films, and partnered in 11 more.
*** German companies co-produced 4 films.
*** Canadian companies co-produced 3 films.
*** South African and New Zealand companies were sole producers of 1 film each. Japan and Romania co-produced 1 each.

French production is an interesting case given the leading French role in promoting both strong IP protection and Europeanist cultural politics–including the well known ‘cultural exception’ for trade in audiovisual goods and services.  French companies figure in only 4 films on the list—and in no cases for movies filmed in France, in French, or prominently involving French actors or filmmakers. The No.1 film on the list, Source Code, was co-produced by Vendome Pictures–a relatively new French production company dedicated to producing, by all appearances, American movies.  Source Code stars Jake Gyllenhaal and was filmed in Chicago.

Another feature of this list is that 97 of 99 of the films are in English (the two non-English films are Indian).  The list makes a strong case that, in the absence of licensing barriers, the international market is an English language market and more particularly a Hollywood market that occasionally involves foreign production partners.

Even the long tail (down to #99 at least) isn’t European.  For the most part, it’s composed of the Hollywood movies from the last year that you’ve never heard of: the Kevin Bacon filmElephant White; the girl surfer/shark attack/Dennis Quaid movie Soul Surfer; the Russel Crowe/Elizabeth Banks film, The Next Three Days; the Topher Grace/Anna Faris flick, Take Me Home Tonight, and many others. According to the MPAA, 677 film were produced by US production companies in 2009.  That’s a lot of movies that go straight to the back catalog! And even that number is well off the peak of 2006-2007.

Is this the sign of a European cinema in decline?   Not if we look at the number of feature films produced, which should certainly factor into any account of piracy’s effects on incentives to produce.  The number of feature films produced in Europe has increased every year in the last five.  Almost 1200 were produced in 2009.

[The blue part of the chart is the percentage of a film's total audience that it receives in its home country (vs. the rest of Europe). Source]

Some of this insularism reflects linguistic and cultural differences within Europe.  And some of it reflects the fragmentation of the European market.  The burden of rights clearance across 27 countries and innumerable production companies makes it very difficult to distribute European films widely within Europe–and far more difficult, in particular, than licensing large catalogs from the six US studios.  The EC has made reducing these market barriers a high priority, but has shown less certainty about how to move forward.  As EC reports have noted:

The practice of territorial licensing has a lot to do with commercial decisions based on the structure of a European market that is characterised by linguistic and cultural differences, as well as by high transaction costs in distributing local content across borders. (p.185)

In other words, it’s not clear where the market obstacles stop and the mismatch of product with demand begins.

Here, our list of downloaded films points to the future–and to the main dilemma facing European cultural policy.  The emergence of a more unified audiovisual market suits both the political project of European unity and the culturalist project of making more European productions available to more Europeans.  Given the current constraints, lower barriers to licensing will certainly increase the range of European offerings to European consumers.

But there’s a catch: so far, the European market and–beyond that–the global market, has had little to do with expressions of cultural specificity or auteur-driven visions.  It has to do, above all, with making films in English that minimize those particularities.  It means producing a Europe built around historical epics (Ironclad), sci-fi/fantasy (Inception, Harry Potter) or, often quite literally, the perspective of the universal (American) tourist, like last year’s The Tourist (Johnny Depp in Venice) or Unknown (Liam Neeson in Berlin).

All of the above were joint US/EU productions on our July download list.  And it means a European film industry reorganized further into an investment vehicle for Hollywood movies, like Vendome Pictures, the now defunct publicly-funded Medienfonds in Germany (Battlefield Earth,Terminator 3), or Luc Besson’s massive, soon-to-be opened Cite du Cinema north of Paris.

My goal is not to make an anti-Hollywood argument here.  There are pros and cons to this system of public subsides, and greater integration into the global market might be, on balance, a good thing in business and cinematic terms. But it is important to be clear about the future that the EC is promoting with its IP policies.  It is not a defense of European heritage or–primarily–a vision of the French auteur able to bring his or her distinctive vision to a global audience. It’s a vision of European production companies  as slightly better integrated junior partners in global Hollywood.

It’s this junior partnership that should be weighed against the wider sacrifices of privacy and freedom of speech built into so many recent national and EC-level IP enforcement policies, such as the French ’3-strikes’ plan, which will cut French citizens off of the Internet for the piracy of Hollywood productions.  Strong enforcement reinforces status quo positions in the market, but at an escalating public cost as consumer behavior becomes the real focus of enforcement activities.  There is nothing in these policies will alter the balance of cultural power or change the direction of payments.  That’s why I’ve characterized the EC enforcement plan as: “send money to the US.”

Moralizing IP rhetoric is also a handicap in this context.  Continuing to defend IP as a fundamental right long after it has been made an object of trade policy is to surrender any real leverage in making deals.  A trade negotiator would be very lucky have such a partner on the other side of the table.  Where could Hollywood find such a partner?

How the European Commission Took Up the Cause of Hollywood

I know and understand that our french conception of author’s rights isn’t the same as in the United States or other countries.  I simply want to say that we hold to the universal principles proclaimed in the American constitution as much as in the Declaration of the Rights of Man in 1789: that no one should have the product of their ideas, work, imagination–their intellectual property–expropriated with impunity.

Each of you understands what I say here because each of you is also a creator, and it is in virtue of these creator’s rights that you have founded businesses that today have become empires.  The algorithms that give you your strength; this constant innovation that is your force; this technology that changes the world is your property, and nobody contests it.  Each of you, each of us, can thus understand that the writer, the director, or the performer can have the same rights. – French President Sarkozy, opening the ‘e-G8? conference that he convened this past April.

With this fulsome praise of tech and media CEOs at the e-G8, Sarkozy expressed the basic European cognitive dissonance on IP:  the embrace of universal rights as a way of pretending equality with the real powers in the room.  More cynically, it is the embrace of the foreign agenda as a way of rewarding the local junior partners.  Indigenous elites used to play this game with the French back when they had the empire.

How did Europe get here?  Tellingly, there was initially little European enthusiasm for a broad trade agreement on IP in the 1980s.  By most accounts, lobbying by US tech and pharmaceutical industries made the difference, capitalizing on a wider overestimation of–and nostalgia for–Europe’s role as a cultural superpower, when it was the primary beneficiary of stronger international IP laws.  More narrowly, the European Commission’s IP activism can be traced to the actions of a handful of American CEOs, who convinced their European counterparts of the benefits of a global IP deal in the run-up to the WTO agreement in the 1980s.   Those counterparts, in turn, applied pressure on their national governments and, through them, the EC.

This gambit has been described in several histories of the WTO negotiations, including Peter Drahos and John Braithewaite’s excellent Information Feudalism.

EC bureaucrats were less keen on trying to harmonize intellectual property standards via the trade regime. They had had some experience of the difficulties of trying to harmonize intellectual property standards in Europe. Some states, such as Germany and the UK, were keen on higher standards while others, such as Spain and Italy, were not so inclined. The view coming out of the EC at this time was to press on with the initiative on counterfeiting in the GATT (a lot of luxury European trade marks were the subject of counterfeiting) and make a general IP code a much longer-term priority….

The problem facing Pratt and Opel [Edmund Pratt, CEO of Pfizer and John Opel, Chairman of IBM] was clear enough. They had to convince business organizations in Quad countries [the US, the EU countries, Japan, and Canada] to pressure their governments to include intellectual property in the next round of trade negotiations. That meant first convincing European and Japanese business that it was in their interests for intellectual property to become a priority issue in the next trade round…..

Pratt and Opel’ s response was swift. In March 1986 they created the Intellectual Property Committee (IPC).24  The IPC was an ad hoc coalition of 13 major US corporations: Bristol-Myers, DuPont, FMC Corporation, General Electric, General Motors, Hewlett-Packard, IBM, Johnson & Johnson, Merck, Monsanto, Pfizer, Rockwell International and Warner Communications. It described itself as ‘dedicated to the negotiation of a comprehensive agreement on intellectual property in the current GATT round of multilateral trade negotiations’ (pp.117- 118) ….

Enrolling European business in the network was the essential first step for the IPC… The IPC had established a line of dialogue with the Union of Industrial and Employers’ Confederations of Europe (UNICE) in November 1986. It proved vital. In Europe’ s more hierarchically ordered world of business lobbying, UNICE was the key portal of European business influence on the EC. During 1986 and 1987 close cooperation developed between UNICE representatives and EC officials; UNICE was given the opportunity to comment on the EC’ s negotiating position and drafts. In May 1987 UNICE produced its own position paper on GATT and intellectual property arguing that the EC’ s approach was ‘deemed too narrow by European industry’ and that the ‘scope of the negotiations must be broadened’ to include other areas of intellectual property where European industry was making heavy R&D investments.  In the following months this became the position of European Community negotiators (p.128)….

Perhaps what US CEOs were able to sell to their European and Japanese counterparts was a vision of a globally secure business future. Ultimately, US corporations might do best out of the globalization of intellectual property standards. A world in which US corporations were dominant but European and Japanese corporations still remained powerful players and strategic partners was preferable to a world in which corporations from all these countries faced competition from increasingly efficient developing country manufacturers. It made sense for the most powerful corporations from the world’ s three strongest economies to collaborate on a project that would enable them to lock up the intangible assets of business in the new millennium and allow them to use those assets to set up production facilities wherever it suited them best. The international character of their production along with their need to capture new markets became the basis of the mutual interest needed for an alliance between them. (p.119) ….

Although they never quite grasped the fact, European trade negotiators had more in common on intellectual property standards with their developing country counterparts than they realized. The US initiative on intellectual property was aimed at European and Japanese markets as much as it was at the tiger economies of Asia. (p.83)

So what would a disenchanted, liberated EC do?  As an American citizen, it is perhaps presumptuous to make suggestions.  But as a French citizen, hey, it’s my EC too!

It could start by distinguishing more clearly between the broader welfare interests of EU citizens and the commercial interests of junior production partners in global Hollywood.  In an earlier era,  it was plausible to think of these commercial and public interests as substantially the same.  Movies were cheap and played a much larger role in public culture.  French or German or Swedish cinemas made stronger claims to being globally-relevant, distinctive national cultural champions.  Copyright infringement was harder, less frequent, and generally industrially organized, which made enforcement a relatively painless proposition.

Today is different.  As IP enforcement targets individual behavior and comes into conflict with other basic values (privacy, freedom of expression), commercial and public interests have begun to diverge.

The EC could also think differently about Europe’s opportunities in the larger digital media transition.  Where some parts of the EU audiovisual industries lose from piracy, the larger impact is chronically exaggerated in EC statements and mitigated (if not completely overshadowed) by the EU system of public subsidies for production.  This may be an inefficient system that produces a lot of movies that relatively few people want to see, but it’s arguably a pretty good model for managing the transition to a more fully realized digital media economy, in which piracy drives the development of cheap, legal, digital access (see Netflix, Hulu, Spotify), and public subsidies ensure that there’s a lot of relatively rich European content to distribute. That, it seems to me, is a plausible vision of a digital media economy that leverages Europe’s strengths, rather than reinforces its weaknesses through a costly war on internet users.

Creating a more unified European audio-visual market is an important goal in this context, but also an achievement that is likely be built on the homogenization of EU production.  The public subsidy model is probably the only counterweight–at a continued cost to wider commercial prospects.  Struggling to adopt the fragile economics of Hollywood blockbusters, in contrast, is a risky bet that should probably be left entirely to the commercial sector.  Leading the way in strengthening digital enforcement seems like an especially bad choice in this context since its short term effect is just to send money the US.  Europe has little to lose from a wait-and-see approach.

De-moralizing the IP debate is also an important step.  At the Americans’ insistence, it’s a trade policy debate now, and nothing should be freely conceded by the lesser partner in those trades.  What, in other words, do the French get in return for enforcing Hollywood’s copyrights?  The answer should not be limited to: the dignity of the French auteur.  Don’t bring a knife to a gun fight.

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

A few months after the announcement the deal eventually bounced. Although GGF’s shareholders agreed to the acquisition, the company failed to come up with the required $7.8m (SEK 60 million). What followed was mostly silence and the deadline for the acquisition eventually passed without an official response from the company.

Many thought that the company had abandoned its BitTorrent plans for good, but behind the scenes it was preparing for a second shockwave. In the last month GGF CEO Hans Pandeya has been continuing his plans to acquire one or more torrent sites to start an industry approved entertainment platform. One of the prime targets for a takeover at the moment is the popular BitTorrent site Demonoid, but other sites have been approached as well.

“I have finally managed to get some funds in place and want to acquire Demonoid and some other sites to execute my plans,” Pandeya told TorrentFreak. “I lost a year and a fortune due to Aktietorget’s [the equity marketplace] acrobatics during my attempt to acquire The Pirate Bay in 2009 but I think it is still not too late to acquire and convert torrent sites.”

Whether Demonoid is open for an acquisition by GGF remains to be seen. The site’s owner has not commented on the proposal yet but Pandeya hopes there will be a favorable response to his plans.

It has never been a secret that GGF was interested in buying more than one torrent site to build its entertainment empire. Last year, when all eyes were pointed at GGF’s takeover of The Pirate Bay, the company also put in a 20 million euro behind-the-scenes offer for fellow BitTorrent site Mininova. Even today, Pandeya is still interested in reactivating the deal with The Pirate Bay.

“The Pirate Bay and Isohunt are on my Most Wanted list of course but I have to take one step at a time. I hope it is going to work this time. There is a positive attitude towards out-of-the-box thinking in the US which seems to be essential for this project so keep your fingers crossed.”

It is questionable how realistic Pandeya’s most wanted list is in terms of takeover potential. TorrentFreak contacted representatives of The Pirate Bay and isoHunt who both assured us that they are not interested in a deal with GGF at the moment, not least because they doubt Pandeya actually has any money to splash around.

The owner of Demonoid, the prime target of GGF at the moment, was contacted for a comment but we haven’t heard back at the time of publication. Despite all the skepticism, Pandeya firmly believes in his plans to transform torrent sites into ‘legal’ music and movie stores, and there is little doubt that this won’t be the last we hear of it.

“My plan is doable,” Pandeya said.

Update: Demonoid’s owner got back to us. We were told that he has no intention to sell the site to Global Gaming Factory. This means that Pandeya has to find another candidate to carry out his plans. Demonoid will remain as it is.

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