As one of China’s top 10 Internet companies, Xunlei is a massive operation. In the first three months of 2014 the company enjoyed 300 million monthly unique visitors.
Among other file-sharing ventures, Xunlei operates ‘Thunder’, the world’s most popular torrent client. This and other issues have placed the company firmly on the radar of the MPAA.
The movie group first took legal action against the China-based outfit in 2008 but by 2014 relations began to warm with Xunlei pursuing an IPO in the United States. In May last year there was a breakthrough, with the former rivals signing a Content Protection Agreement (CPA) requiring Xunlei to protect MPAA studio content including movies and TV shows.
In October 2014, however, the MPAA reported Xunlei to the U.S. government, complaining that piracy was rampant on the service. Something had clearly gone wrong, an assertion that was only underlined this morning with a report that the MPAA has now sued Xunlei.
“For too long we have witnessed valuable creative content being taken and monetized without the permission of the copyright owner. That has to stop and stop now,” said Mike Ellis, the MPAA’s Asia-Pacific chief.
While it’s clear that the MPAA are disappointed with Xunlei’s efforts, it’s certainly possible that the company found it impossible to fulfill its agreement with the MPAA. Documents obtained by TorrentFreak dated May 2014 (days before the deal was signed) detailing a draft agreement which Xunlei “stated unequivocally in writing that it will accept” reveal the toughest set of anti-piracy demands ever seen.
Content filtering
The CPA reveals that Xunlei agreed to deploy Vobile‘s fingerprinting system across all of its services (including file-sharing clients) to ensure that no unfiltered content would ever be uploaded or downloaded. Filters were to have been deployed within 120 days of signing the agreement and would have to be implemented on both past and future projects.
Repeat infringers
The CPA requires Xunlei to terminate those who not only infringe but also those who attempt to infringe copyright. For all U.S.-based users of Xunlei the company agreed to implement a three-strike policy, with Chinese user strike numbers to be determined later.
“This is a very strict repeat infringer policy — as strict as exists anywhere in key respects — in that both uploads and downloads count and in that infringement is determined by the filter (not just based on
notices received),” the MPAA document reads.
“[The] filter will identify each and every instance of a user attempting to infringe a studio work, by uploading or downloading. Thus, the repeat infringer numbers likely will be off the charts in our favor when we have those later negotiations. Xunlei is also obligated to preserve data on identified infringers, and we can request this data in our due diligence reviews.”
Site blocking
The CPA also grants the MPAA the power to determine who Xunlei can deal with online.
“[The MPAA] will be able to identify to Xunlei what we believe to be ‘pirate sites’ and Xunlei will block those domains from all aspects of its system (e.g., no using those domains for accelerated downloads and no accepting communications/links from those domains),” the MPAA writes.
Licensing – content is banned unless the MPAA says otherwise
As a content provider Xunlei has licensing deals with many companies to provide legitimate content. However, the CPA with the MPAA restricts the company’s ability to make its own decisions without reference.
“The definition of Unauthorized Content…excludes content for which Xunlei has a license directly or for which the studios have granted a license to a site or users that would extend to and authorize the use contemplated by Xunlei. However, this is not left to Xunlei to determine,” the MPAA notes.
“All content is deemed Unauthorized unless Xunlei obtains express written confirmation from the appropriate studio that a relevant license has been granted,” with the CPA “putting the burden on [Xunlei] to get written confirmations and effectively to create a white list.”
Access to source code
“[The MPAA] will have rights of due diligence, which will allow us access to source code and technical data/documents, to assess Xunlei’s compliance,” the MPAA adds.
When it all goes wrong
The Content Protection Agreement includes clauses for the MPAA not to sue Xunlei for copyright infringement as long as it keeps to its side of the deal. However, it appears the MPAA wanted to avoid legal action if at all possible.
“[In] the event that we are still seeing significant infringement even with Xunlei honoring its filtering obligations, then either [Xunlei] violated its representation (which by agreement is deemed a material breach) or the ongoing cooperation provisions kick in – and if [Xunlei] does not comply with them, we can sue,” the MPAA notes.
“Given the limited relief available in an action in China and the uncertainty of suit in the US, we strongly recommend that we accept the contingent covenant not to sue in the draft CPA.”
There are currently no reports of the MPAA’s legal action in Chinese media but it will be interesting to see the reaction in the days to come.
